Team Alpha Retirement Portfolio: It Is All About Our Income, Folks

Includes: CVX, INTC, JNJ, NLY, O, T
by: Regarded Solutions

Let's face it, August was one crappy month in more than just the stock market. When it comes to this month's Team Alpha Retirement Portfolio update, I am also going to make note of some of the issues that have affected the entire value of the portfolio, as well as what I am planning for the 4th quarter of 2013 (i.e. the portfolio's 4th quarter since it began 11/23/2011).

Without going into too much detail about every issue in our update, I will list the bullet points and reference the articles I have written that relate to the issues, and note the key points.

  • The Federal Reserve Will Taper Off From QE, Maybe

I know we have bandied this about ad nauseum, but unfortunately it is an issue investors have had to deal with for months on end. In this article I stated my case for purchasing shares of Annaly Capital (NYSE:NLY). In fact it was only a few days after my article was published that Jeff Gundlach announced on CNBC that he has turned bullish on some mREIT stocks, and NLY specifically, as noted in this Seeking Alpha Market Current:

In a major about-face, Jeff Gundlach turns bullish on the mortgage REIT sector (REM +0.7%), telling CNBC he spots value as many are trading at 10% or more discounts to net asset value. He specifically mentions Annaly (NLY +1.3%) as being a buy. Reported book value as of June 30 is $13.03 vs. the current price of $11.50

I almost feel vindicated by this event, since I had been taking heat for still holding shares, and even suggesting that I am upping my allocation. I believe Gundlach to be spot on. Think about NLY as you consider some additional risk allocations.

  • The Economy Is NOT Getting Better, It Is Getting Weaker

In the same article I noted above, I wrote that the Fed might not taper QE at all, because the economy is getting weaker in the areas that count the most right now; mortgage rates have risen, housing sales and mortgage applications have declined, employment numbers remain weak, and income has not gone up, it has actually gone down since the Great Recession "ended."


Unemployment rose in 21 states and declined in 27 states during the last three months, according to a new analysis by a left-of-center advocacy group, the Economic Policy Institute.

"In the midst of this ongoing economic train-wreck, national and state policymakers need to redouble their efforts to create good jobs that put working families on a sound path to economic security," said a statement from the left-wing group.


Despite improving builder confidence, sales of new single-family homes dropped to their lowest level since last October, the Census Bureau and HUD reported Friday.

The seasonally adjusted annual rate of sales dropped a stunning 13.4 percent to 394,000 in July. Economists surveyed by Bloomberg expected June sales to drop to 487,000 from June's originally reported 497,000. June sales were revised to 455,000.

Mortgage applications and rates:

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.6 percent in the week ended August 16... Demand to refinance existing loans has declined as rates have climbed. The refinance index shed 7.7 percent last week, its biggest weekly fall since late June, and is down 62.1 percent since peaking in the week ending May 3. The refinance share of total mortgage activity slipped to 62 percent from 63 percent the prior week.

Household Income:

U.S. median household income, once adjusted for inflation, has fallen 4.4 percent in that time, according to the report from Sentier Research. The report is based on an analysis of Census Bureau data... The median, or midpoint, income in June 2013 was $52,098. That's down from $54,478 in June 2009, when the recession officially ended. And it's below the $55,480 that the median household took in when the recession began in December 2007.

Now, one might point to these facts, as well as the Fed actions or lack thereof, and say this is bad news. I keep looking at it and come up with the same as I always have -- confusion reigns.

  • Saber Rattling In Syria Has Added To The Market Stress

Of course if there is anything worse than bad news, it is uncertainty. I think the markets are being whipsawed more by uncertainty than anything else. Keeping in mind the unfortunate events coming from Syria, and the US possibility of military action.

I noted this event in this article:

Let's face it, nobody wants to ever see suffering around the globe. Especially when that suffering is inflicted in a civil conflict that creates fear of a global response. It is times like these that create unforeseen opportunities for stock market investors who realize that these events, while awful and horrible, will be short lived.

With all of these events surrounding us, let's get to our update.

We Added Cash, Added To Our Core, And Had A Lousy Month

The portfolio consists of Ford (NYSE:F), Chevron (NYSE:CVX), Apple (NASDAQ:AAPL), McDonald's (NYSE:MCD), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), AT&T (NYSE:T), General Electric (NYSE:GE), BlackRock Kelso Capital (NASDAQ:BKCC), KKR Financial (KFN), Procter & Gamble (NYSE:PG), CSX Corp. (NYSE:CSX), Realty Income (NYSE:O), Coca-Cola (NYSE:KO), Annaly Capital , Cisco (NASDAQ:CSCO), Newmont Mining (NYSE:NEM), and Wells Fargo (NYSE:WFC), and Intel (NASDAQ:INTC).

The portfolio was short on cash, and that is a concern when an investor has limited dry powder to take advantage of opportunities. That being said, I sold our position in BMY and added shares of JNJ, O, T and CVX. Here is where we stand after 22 consecutive months of our journey with the Team Alpha Retirement Portfolio:

Stock #Shares 8/30/2013 TotValue Orig. Price
XOM 100 87/shr 8700 75
JNJ 105 87/shr 9135 63
T 120 34/shr 4020 28
GE 500 23/shr 11500 15
BKCC 500 10/shr 5000 10
AAPL 20 487/shr 8840 436
PG 100 77/shr 7700 61
KO 100 38/shr 3800 34
NEM 200 32/shr 6400 33
WFC 200 41/shr 8200 40
O 240 40/shr 9600 34
KFN 500 11/shr 5600 10
NLY 400 12/shr 4800 13
CSCO 400 23/shr 9200 18
CVX 55 120/shr 6600 116
MCD 100 95/shr 9500 86
CSX 200 25/shr 5000 19
F 300 17/shr 5100 13
INTC 200 22/shr 4400 24
Cash Rsvs x x 7391
Tot Value x x 140486

We now have a total portfolio value of $140,486, which is an increase of 40.49% over the entire timeframe (for the month, we dipped by a bit more than 3%). Based on all of our purchases throughout the 22 months (see all of our articles on this portfolio), we now have a yield on cost of 5.10%. We began with a YOC of about 4.3% with $100k invested, for an income stream of roughly $4,300/year, 22 months ago.

Now we have roughly $133k invested at a yield of 5.10% and an income stream of about $6,800/year. Not only has the total value of the portfolio had a great run, but more importantly, we have increased our income stream by more than 50% during the same period of time.

Isn't that why we actually do this stuff? I am hoping that we can continue this trend for a long time to come.

Let's Not Forget Those Juicy Dividends

Not only did we add cash, add some shares and sell a position, but we also received about $564 in dividend cash, which is reflected in our cash reserves.

XOM, JNJ, AAPL, WFC, O, KFN, CVX, CSX, F, and INTC all went ex-dividend this month, which is the way I calculate the cash received. It is much easier than to do each one separately during any given month and works out the same.

Those dividends are our life source, but I am concerned about one stock that is now on the bubble.

Intel Continues To Annoy Me

In the portfolio's 4th quarter of this year, which begins now, I will be doing some very heavy research on Intel. With all of the positive news about new products such as Haswell, and Bay Trail-T, so far we have seen squat from the stock. The company has not even increased the dividend this year, and since this is not a dividend "opportunity" stock, like BKCC, or KFN, not increasing the dividend is a very big deal.

This market current of today will be the deciding factor on whether or not the Team Alpha Portfolio will continue to own shares of INTC:

Intel (INTC) is expected to unveil a new lineup of Haswell processors on Sept. 1, reports Digitimes, citing sources from the upstream supply chain. Intel will debut 13 processors for PCs including the high end Core i7-4771, mid-range i5-4440 and i3-4340, as well as the entry-level Pentium G3430. Intel is also slated to release 24 Haswell models for laptops including the Core i7-4610Y, i5-4300Y, Pentium 3560Y and Celeron 2955U.


Separately, Intel will reportedly unveil its Bay Trail-T platform at the Intel Developer Forum on Sept. 10-12. ASUS, Acer, and Lenovo will showcase tablets based on the MID platform. The tablets are expected to hit shelves in late-Oct.

Since we all know that the PC market continues to slide, the legacy revenue that INTC has enjoyed will continue to drop as well. If the two new launches above do not impact the stock in a positive way, I will be dumping the position and looking for greener pastures for our income stream.

The Bottom Line

As the headline states, it is all about our income. As long as the income stream remains strong, the portfolio can dip and squeak, and stay confused until it isn't.

We will be here all along the ride to keep the arrow of income headed in the right direction.

Disclosure: I am long AAPL, BKCC, CSCO, CSX, CVX, F, GE, INTC, JNJ, KFN, KO, MCD, NEM, NLY, O, T, WFC, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.