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I am a retired individual investor in my late 40s who has recently moved from Washington DC to Portugal. My investment strategy is threefold: (1) spend less than I earn, (2) use the savings to acquire shares of companies that produce necessary products and services, with durable competitive... More
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  • With Pangs Of Regret, I Am Selling Chubb Today.

    I've owned Chubb (ticker CB) for years. It is a dividend champion, and has been consistently undervalued for as long as I've owned it.

    That ended today. ACE Insurance (ticker ACE) has agreed to purchase Chubb in a stock and cash deal, for a handsome premium above yesterday's closing price. I happen to own ACE as well, and have no plans to sell it.

    Chubb opened up by 35% within the first few moments of trading, and I've decided to take that as a sign. I'll effectively own some Chubb anyway through my ACE holdings, but holding Chubb as a standalone investment is no longer going to be possible. Moreover, I surmise that the price ACE is paying for Chubb is fair and reasonable - I prefer owning things at prices that are less than fair and reasonable.

    I have long maintained that the only reason why I'd ever sell any asset is if management lies to shareholders. There is one more reason to sell - your company just got bought. I don't suggest that is an automatic sell trigger by any means - the new parent company could very well be something you'd want to own. But if the buyout is reasonable and you already have a significant position in the parent company, then it could very well be a good time to sell the investment.

    I sold all my Chubb shares (with tears in my eyes), and put the proceeds into IBM, NNN, WPC, DD and KED. By doing so, I increased my income diversification, and best of all, locked in a hefty raise - CB now sports a 1.6% dividend yield, whereas the assets I just bought have a combined yield of 5.5%.

    The negative side to the story is that I have significant gains built into the Chubb shares I sold. For the Chubb shares in my IRAs, that doesn't matter, but for the shares in my taxable account, it does. I decided to harvest some losses on other positions to offset the capital gains I realized on the Chubb shares. Accordingly, I sold off some shares in IDV and TAL, and put the proceeds into AMLP, NHI and EMR. These transactions are income neutral in terms of my overall portfolio income, although I expect the stability of the income to be improved. I say that because IDV distributions fluctuate significantly, and TAL's very high dividend yield seems potentially unstable. MLP funds like AMLP and triple net lease REITs like NHI have contractual based income sources, which can be more stable than income generated from the shipping business. EMR has increased dividends steadily for over 20 years, and is a model of dividend security.

    I believe that will conclude my investment activity for the month, leaving me to read articles, earnings reports, and management discussions from our portfolio companies and funds.

    Tags: CB, TAL, IDV, DD, KED, NHI, WPC, EMR, AMLP
    Jul 01 12:37 PM | Link | Comment!
  • Mortgage Scams

    Here's an interesting anecdote. Over the last two days, I have been getting multiple phone calls from various phone numbers. Since I rarely answer my phone, the caller or callers will often leave voice messages that say things like "This is Adam from Quicken Loans! I have important information about your recent loan application! Call me at XYZ number as soon as possible. This requires your IMMEDIATE ATTENTION." When I check the phone log, the name "Quicken Loans" appears next to the phone number. I've gotten messages from at least three different "lenders" regarding recent loan applications.

    Now the thing is, I haven't applied for ANY new loans. My first thought was that maybe someone had hacked my identity, and was using it to take out fraudulent loans. So, I pulled my credit report to see whether there have been any requests by any lender to review my credit report. None. So much for the identity hack theory.

    My next thought was that this must be some sort of phishing scam. I assume that if I return the calls, the "lender" will need to verify my personal information - social security number, date of birth, whatever. And the "lender" will then promptly sell the information to the Russian mob.

    So, I went onto the White Pages and did a reverse phone number lookup. Interestingly, all of the numbers (some from Michigan, some Baltimore, some Florida) are registered to some sort of web address. The same enigmatic web address for each number. Only one of the phone numbers was actually registered to a person with an actual address, so I went onto Google maps to see where the address is located. And then, I did "street view" so I could see what the address looks like.

    It doesn't look like Quicken Loans' office. No, it doesn't at all. The address this phone number is registered to is a vacant lot in Baltimore!

    As far as the name of the person the number is registered to, who knows. Maybe some poor fool who fell for a similar scam and coughed up all his personal information which the scammer used to take out phone numbers.

    Word to the wise.

    Jun 30 6:17 PM | Link | Comment!
  • June 2015 Investments

    Every month, I collect my dividends, pay my bills, and reinvest whatever's leftover into more dividend paying stocks. I do this regardless of market conditions. While I prefer paying lower prices for the shares I buy, I'll pay up for a high quality, blue chip dividend champion, such as Dupont or Exxon. Up to a point, that is. I would rarely consider paying more than 20 times more than a company's average earnings over the last five years. And I'd rarely consider an investment that offers a yield of less than 2%.

    The most important thing to me is that I only want stable, proven businesses with unimpeachable records of dividend growth. This month, I bought IBM, DuPont and Valspar. These might not be the cheapest stocks out there, but I want to add positions because at the moment, distributions from these companies comprise only a tiny fraction of my portfolio income. My version of diversification is based on income sources, not share price, so I have a bias towards buying shares of companies which are currently underrepresented income sources for me.

    This month, the only interesting thing going on is the Greek financial crisis. Prices for stocks are down across the board, which is great news for anyone (like me) who reinvests regularly, or who otherwise has cash to invest. The reason why it is hard to picture why stocks across the Earth are "worth" 2% less today than last Friday is because stocks are NOT "worth" 2% less. I doubt company earnings are going to be affected by Greece - unless the company in question happens to be a Greek bank or is otherwise tied to the Greek economy. But will people eat less Smuckers' jam? I doubt it - but yet the stock is down on the Greek news regardless. To my way of thinking, this is an example of how the efficient markets hypothesis is just plain silly. Prices move for reasons having nothing to do with value, and everything to do with emotional factors such as irrational panic.

    Tags: DD, VAL, IBM
    Jun 30 12:48 PM | Link | Comment!
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