By Jonathan Chen
Back in August, Donald Trump went on CNBC and talked about how for the first time ever, he bought stocks, buying in the bluest of blue chips. He bought stock in Bank of America (BAC), Citigroup (C), Caterpillar (CAT), Intel (INTC), Johnson & Johnson (JNJ), and Procter & Gamble (PG).
His rationale was that he was not earning any money on CDs in the bank, and that he had to put his money somewhere.
"I love these companies. I've watched them for years and I've never owned stock in them," Trump went on to say. "I went out yesterday and said, 'Look, I'm not getting interest on CDs...so I went out and bought some stock." It's just something I've never been much into and now I decided to do something about it," he said of the purchases. "We'll see what happens. Who knows if it's good?"
Given that Trump is known for self-promoting, and will always toot his own horn, especially when the facts are lined up in his favor, I thought it would be interesting to see how his picks have performed. This comes more than two months after he publicly announced his investments on CNBC on August 11. Trump did say that he will wait to see how the portfolio performs for one year, as he is not a day or swing trader.
The first pick we will look at is Caterpillar, which manufactures and sells construction and mining equipment around the globe. Shares currently trade at less than 10 times 2012 earnings, and sport a 2.2% dividend yield. Since the close of trading on August 10, shares have lost just over 1%, 1.37%, excluding dividends.
The second pick is Bank of America, the embattled banking giant. Since Trump announced his stake in Bank of America, Warren Buffett announced he purchased a $5 billion stake in the Charlotte-based lender, and the company just recently reported earnings. Shares trade at 6 times 2012 earnings, and have a 0.6% dividend yield. Since the close of trading on August 10, Bank of America has lost 15.66%.
The next name is Citigroup. Citigroup also recently reported earnings, and announced it would be paying $285 million to the SEC to settle liabilities against it for mortgage related investments. Citigroup was seen as the worst of the worst during the financial crisis of 2008, needing $45 billion worth of TARP money to help shore up its balance sheet. Shares trade at less than seven times 2012 earnings, and sport a 0.1% dividend yield. Since August 10, shares have lost 6.44%.
Intel is the next company to look at. Much has been made about the death of the PC, but after Intel reported strong quarterly earnings earlier this week, some may be rethinking that thesis. Shares trade at less than 10 times 2012 earnings and sport a 3.5% dividend yield, sharply higher than the yield on a 10 year U.S. Treasury. Since August 10, shares have returned 15.73%, the best among the group.
Johnson & Johnson is the next company to look at. The New Brunswick, N.J.-based company has been embattled over problems with Tylenol over the past twelve months, and some are questioning the growth prospects of its consumer division. It trades at 12 times 2012 earnings, and sports a 3.6% dividend yield. Since August 10, shares have returned 1.77%.
The last company to look at is Proctor & Gamble, the consumer products giant based out of Cincinnati, Ohio. Procter & Gamble has started to move away from middle market products, and is increasingly focusing on higher end products and lower end products. This is called the "hour-glass" approach, as the middle class gets squeezed. Since August 10, shares have returned 9.5%.
Three winners, and three losers for Trump. Not bad, but nothing to write home about. His gain in Intel, by far among the best of the six, is canceled out by the loss in Bank of America.
We will update the portfolio at the end of the year. If Trump's portfolio has similar returns at the end of one year, which he said was his time frame, he may be firing himself as his own money manager.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.