The Millennial Portfolio: Longer Than Long Term? (II)

|
Includes: ABBV, ADRNY, AES, AIA, BAC, DIS, FDP, GIS, GOOGL, HEINY, HRL, IEXXF, INTC, LMNR, MSFT, NEE, NFLX, NVDA, PFE, SPWR, TAN, TAP, TOT, TSN, VTR, VWDRY, WELL
by: The Millennial Investor

Summary

The Millennial Portfolio returned 2.28% over the last one and a half months.

Limoneira was the best performer, while Sunpower and Fresh Del Monte were the worst performers.

I started two new positions, namely, in Disney and Molson Coors.

My first portfolio review came out on the last 16th of July. Currently, we are approximately one and a half months further. As I have stated in my first article, I would like to inform millennials about the Millennial Portfolio's performance on a monthly basis. Since the last portfolio review, the S&P 500 increased 3.68%, while the Millennial Portfolio increased 2.28%. I have started two new positions, namely, in Disney (DIS) and in Molson Coors (TAP). No sales were made since the last review. In this article, I will (i) go over the performance of the portfolio, (ii) go over the two worst performing stocks, (iii) explain why I started two new positions and (iiii) give an overview of the allocation degree per category.

Portfolio performance in local value

Company/ETF Amount of shares Price Local value Jul. 16, 2018 Local value Aug. 30, 2018 Percentage change Category
CASH & CASH FUND (EUR) EUR 43.61 96.24 - Cash
ABBVIE (ABBV) 2 97.58 USD 191.22 195.16 2% Pharma
AHOLD DELHAIZE (OTCQX:OTCQX:ADRNY) 10 21.00 EUR 210.05 209.95 0% Retail
ALPHABET (GOOGL) 1 1,264.65 USD 1,201.26 1,264.65 5% Tech
BANK OF AMERICA (BAC) 9 31.14 USD 258.93 280.26 8% Financial
FRESH DEL MONTE (FDP) 5 38.08 USD 221.75 190.40 -14% Food/Farmland
GENERAL MILLS (GIS) 4 45.68 USD 178.32 182.72 2% Consumer
HEINEKEN (OTCQX:OTCQX:HEINY) 1 85.88 EUR 89.56 85.88 -4% Alcohol
HORMEL (HRL) 6 38.42 USD 225.36 230.52 2% Consumer
INTEL CORPORATION (INTC) 7 48.75 USD 366.45 341.25 -7% Tech
INVESCO SOLAR (TAN) 8 22.16 USD 187.92 177.28 -6% Renewable
ISHARES ASIA 50 (AIA) 6 64.06 USD 373.68 384.36 3% Emerging
ISHARES EURO STOXX BANKS (OTC:OTC:IEXXF) 21 10.48 EUR 232.68 220.00 -5% Financial
LIMONEIRA CO (LMNR) 9 30.08 USD 227.52 270.72 19% Food/Farmland
MICROSOFT CORPORATION (MSFT) 4 112.02 USD 416.76 448.08 8% Tech
NEXTERA ENERGY (NEE) 2 170.53 USD 336.98 341.06 1% Utility
PFIZER (PFE) 6 41.50 USD 225.12 249.00 11% Pharma
SUNPOWER (SPWR) 41 6.97 USD 326.77 285.77 -13% Renewable
THE AES CORPORATION (AES) 12 14.01 USD 157.2 168.12 7% Utility
TYSON (TSN) 3 63.07 USD 197.88 189.21 -4% Food/Farmland
VENTAS (VTR) 3 59.82 USD 175.2 179.46 2% REIT
VESTAS WIND (OTCPK:OTCPK:VWDRY) 7 449.60 DKK 2,733.50 3,147.20 15% Renewable
WELLTOWER (WELL) 3 66.68 USD 189.48 200.04 6%

REIT

Source: Author's created table.

As you can see in the table respresented above, 14 out of 22 positions have given me a positive return. 7 positions returned a lose and one position returned neither a win, nor a lose.

Best performer

Limoneira, a company whose operations consist of producing and selling lemons and avocados, was the best performer with an increase of 19%. One of the reasons for the run up was the acquisition of a packinghouse and its related assets from Oxnard Lemon Associates. The acquisition is expected to increase EPS with $0.08 - $0.10 in FY19. On the last earnings call, management reaffirmed F18 guidance of $0.65-0.75. However, in my last article about the company, I explained why I expect earnings per share to hit the high end of this guidance. With the company's real estate plans coming closer to finally start earning money and the newly announced acquisitions, I expect Limoneira to keep outperforming the market.

Worst two performers

Since the last time I wrote about the Millennial Portfolio, two stocks have performed by far the worst. The first one is Sunpower, which performed poorly because of uncertainty about a trade war with China. Furthermore, the company's costs are expected to increase because of the solar tariffs, while the price of solar panels is expected to drop because of oversupply (mainly caused by Chinese producers). Therefore, there will be margin compression which will work as a double edged sword. The good thing, however, is that Sunpower has paid down over $700 million in debt over the past two years. Therefore, the company's balance sheet looks way better than before. Sunpower can also still count on its strong partner total (TOT), which has a majority stake and owns 56% of Sunpower's shares.

The worst performing stock for the quarter is Fresh Del Monte (FDP). Where Sunpower had a couple of reasons for its decline, there is only one for Fresh Del Monte. The company's earnings report fell way below estimations. The company posted Q2 EPS of $0.14, which is not even comparable with consensus of $1.27. Just like in Sunpower's case, the reason for the bad quarter is a double edged sword. Banana prices were the lowest in the last 10 years in Europe, while costs for the quarter increased due to port congestion, caused by extremely bad weather. Ships had to wait for a couple of days before they were able to load. This had a lot of consequences -- for example, that the company was not able to deliver the promised orders to its customers.

Two new positions

Company/ETF Amount of shares Price Currency Total amount in $ Total amount in €
MOLSON COORS (TAP) 3. 67.44 USD 202.32 172.82
WALT DISNEY COMPANY (DIS) 2. 112.45 USD 224.90 192.11

I opened two new positions, namely in Disney (DIS) and in Molson Coors (TAP). I have been wanting to get into Disney for quite some time now, but could not because of limited financial resources. I think Disney is, with the launch of their new product, certainly going to steal market share from Netflix (NFLX). Disney has a strong appeal to younger viewers with movies like Frozen. I doubt that any of you do not know Frozen. I have seen their merchandise in every country I have been in the last couple of years.

Disney's streaming service will launch in late 2019. And when will the new Frozen II movie be released? The answer is the 27th of November 2019. Can you imagine a group children talking about the new Frozen II movie on the school playground while one of them has not seen the movie yet. That child will probably ask his parents for a subscription to watch the movie his fellow friends love. This will help the company's streaming service have the strong launch it needs.

I also started a position in Molson Coors (TAP) and see this investment as a value play. If you are interested in this beer company, I suggest you read this article, in which I explain my thesis. Click here to find out why I picked Molson Coors over its peers.

Portfolio performance in euros

Company/ETF Amount of shares Price Value € Jul. 16, 2018 Value € Aug. 30, 2018 Percentage change € Category
CASH & CASH FUND (EUR) 43.61 96.24 Cash
ABBVIE (ABBV) 2 97.58 163.86 166.71 1.74% Pharma
AHOLD DELHAIZE (OTCQX:OTCQX:ADRNY) 10 21.00 210.05 209.95 -0.05% Retail
ALPHABET (GOOGL) 1 1,264.65 1,029.36 1,080.26 4.95% Tech
BANK OF AMERICA (BAC) 9 31.14 221.88 239.4 7.90% Financial
FRESH DEL MONTE (FDP) 5 38.08 190.02 162.64 -14.41% Food/Farmland
GENERAL MILLS (GIS) 4 45.68 152.8 156.08 2.15% Consumer
HEINEKEN (OTCQX:OTCQX:HEINY) 1 85.88 89.56 85.88 -4.11% Alcohol
HORMEL (HRL) 6 38.42 193.11 196.91 1.97% Consumer
INTEL CORPORATION (INTC) 7 48.75 314.01 291.5 -7.17% Tech
INVESCO SOLAR (TAN) 8 22.16 161.03 151.43 -5.96% Renewable
ISHARES ASIA 50 (AIA) 6 64.06 320.21 328.32 2.53% Emerging
ISHARES EURO STOXX BANKS (OTC:OTC:IEXXF) 21 10.48 232.68 220 -5.45% Financial
LIMONEIRA CO (LMNR) 9 30.08 194.96 231.25 18.61% Food/Farmland
MICROSOFT CORPORATION (MSFT) 4 112.02 357.12 382.75 7.18% Tech
NEXTERA ENERGY (NEE) 2 170.53 288.76 291.33 0.89% Utility
PFIZER (PFE) 6 41.50 192.91 212.7 10.26% Pharma
SUNPOWER (SPWR) 41 6.97 280.01 244.1 -12.82% Renewable
THE AES CORPORATION (AES) 12 14.01 134.7 143.61 6.61% Utility
TYSON (TSN) 3 63.07 169.56 161.62 -4.68% Food/Farmland
VENTAS (VTR) 3 59.82 150.13 153.3 2.11% REIT
VESTAS WIND (OTCPK:OTCPK:VWDRY) 7 449.60 366.56 422.04 15.14% Renewable
WELLTOWER (WELL) 3 66.68 162.37 170.87 5.23% REIT
Total amount of positions: 22 5,575.65 5,798.894 Profit in €: 127.00 Increase of 2.28%

Portfolio by category

Category Amount invested Category's percentage Target Difference 16th of July Difference
Pharma 379.40 6% 10% -4%
Retail 209.95 3% 3% -1% 0%
Tech 1,754.51 29% 25% 5% 4%
Financial 459.39 8% 5%

3%

3%
Food 555.51 9% 10% 0% -1%
Consumer 352.99 6% 5% 1% 1%
Alcohol 258.70 4% 5% -3% -1%
Renewable 817.58 13% 10% 4% 3%
Emerging 328.32 5% 15% -9% -10%
Utility 434.94 7% 5% 3% 2%
REIT 324.17 5% 5% 1% 0%
Entertainment 192.11 2% - 1%
€6,067.58 100%

I still allocate most of my money to tech companies. Even though I think the industry justifies a high allocation, I still avoid companies which are valued for perfection, like Nvidia (NVDA). When the bear market breaks out, these type of companies will take the biggest hits. I created a new category with my purchase of Disney. I aim at distributing 2% of my portfolio to the entertainment category. I took the 2% from the retail space, because I do not feel comfortable to stay in the retail sector for the next 10+ years. Remember that this portfolio is aiming at longer than long term.

The difference between my emerging market target allocation and the real allocation was -9% one and a half months ago. As you can see, the difference is -10% currently. Therefore, I did not manage to close the gap, but it even got bigger. My initial plan was not to start a new position in Disney and Molson Coors, but to use the money to buy another emerging markets ETF. However, because of the rules set by the European Union, a lot of (U.S. located) ETFs are no longer available for European investors. Click here to read more about this. I wanted to buy ETFs for two reason. Number one is that it will allow me to cover more stocks and therefore reduce risk. Number two is that ETFs do not have (high) transaction costs. Buying shares of a company which trades at an Asian stock exchange costs me €10; this is simply too much. My average position is just €252. Paying a commission fee of 4% is just not profitable.

Feedback

I know I can always improve my articles. Not only my investment skills, but also my writing style. Feedback is therefore really valuable to me. I would kindly ask you to comment on things in this article that you would have done differently. Positive comments are of course always welcome as well! If you enjoyed this article and would like to receive a notification whenever I publish something new, please click the follow button on the top of this article.

Disclosure: I am/we are long ALL STOCKS IN THE MILLENNIAL PORTFOLIO.

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.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.