Retirement: 2018 Performance Of The Future-Proof Portfolio For Young Investors

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Includes: ACGPF, ACNFF, ADM, ADP, AMNF, BASFY, DEO, DIS, DNNGY, ED, ETN, GILD, GLW, HASI, INFY, JNJ, KNYJF, MDT, MMM, NGG, NVO, O, RHHBY, SGAPY, TCEHY, TSM, UL, UNP, VTR, VWDRY, WPC
by: Giesbers Investment Strategy
Summary

The last part of 2018 has been a volatile one for investors, and this portfolio was not spared!

Nevertheless, we achieved a total return of 1.37% in a market which was mostly down.

Dividends continue to arrive, and we are looking forward to the dividend increases of 2019!

At the end of January 2018, I started the future-proof portfolio for young investors in an attempt to model a possible portfolio which a young investor could use to finance his retirement. In my portfolio selection, I place emphasis on the stability of companies. I prefer solid firms which pay a dividend. I'm also quite selective in my sector approach. I want to own companies in sectors which I expect to still be able to thrive in a couple of decades.

I know we are already more than half way into the month of January 2019, but for a long-term investor, timing is not such a big issue. I prefer not to look at the value of my stocks too often. For the portfolio overview, I am using the stock prices of the closing of the markets at the 31st of December 2018. Because the markets performed quite well in January until now, the current value of the portfolio is likely about 3% higher than depicted below.

Without further ado, let us take a look at the 2018 performance of the future-proof portfolio for young investors:

Name Ticker Shares Value Weight Dividend received Gain / loss (incl dividend)
Consumer
Unilever UL 43 2.038,20 3,90% 65,36 4,35%
Disney DIS 22 2.102,41 4,02% 15,74 6,93%
Archer Daniels Midland ADM 57 2.034,61 3,89% 64,98 5,15%
Diageo DEO 69 2.143,07 4,10% 51,13 9,28%
Accell OTCPK:ACGPF 42 791,28 1,51% 21,00 -18,57%
Armanino Foods of Distinction OTCPK:AMNF 488 1.203,52 2,30% 28,11 23,05%
Amsterdam Commodities OTC:ACNFF 40 696,00 1,33% 44,00 -26,15%
Industrial
3M MMM 10 1.659,69 3,17% 46,32 -15,46%
BASF OTCQX:BASFY 21 1.270,29 2,43% 65,10 -33,91%
Union Pacific UNP 18 2.168,16 4,15% 47,00 7,43%
Kone OTCPK:KNYJF 44 1.826,00 3,49% 72,60 -5,77%
Eaton ETN 29 1.735,45 3,32% 65,50 -10,42%
Vestas Wind Systems OTCPK:VWDRY 35 2.301,63 4,40% 43,38 18,19%
Healthcare
Medtronic MDT 29 2.299,02 4,40% 35,88 17,25%
Roche OTCQX:RHHBY 10 2.147,38 4,11% 94,21 12,58%
Gilead Sciences GILD 15 817,91 1,56% 29,08 -14,87%
Johnson & Johnson JNJ 17 1.912,15 3,66% 51,27 -0,09%
Novo Nordisk NVO 43 1.709,22 3,27% 45,31 -12,39%
Utilities
Consolidated Edison ED 31 2.065,32 3,95% 75,74 6,86%
National Grid NGG 109 923,82 1,77% 37,20 -3,90%
Orsted OTCPK:DNNGY 21 1.221,58 2,34% 25,38 26,18%
Technology
Corning GLW 72 1.895,53 3,63% 44,31 -2,90%
TSMC TSM 54 1.736,47 3,32% 48,02 -10,67%
Infosys INFY 134 1.111,70 2,13% 22,50 12,49%
Automatic Data Processing ADP 20 2.286,19 4,37% 33,91 17,70%
Tencent OTCPK:TCEHY 45 1.545,49 2,96% 10,53 -21,15%
Telecom
Singtel OTCPK:SGAPY 994 1.860,16 3,56% - -7,02%
REITs
Realty Income O 46 2.527,90 4,83% 94,62 29,76%
Ventas VTR 44 2.247,36 4,30% 87,85 16,63%
W.P. Carey WPC 19 1.081,55 2,07% 49,09 11,97%
Hannon Armstrong HASI 56 928,70 1,78% 46,79 -1,78%
Total 52.287,76 100,00% 1.461,92 1,37%

Source of table: Own bookkeeping

What catches our eye first is the total performance of 1.37%. I do not want to compare my performance too much with the markets, but when viewed in the light of the developments in the broad markets, 1.37% is not bad for 2018. As I said in past articles about this portfolio, a big part of this performance is explained by the beneficial developments in EUR/USD exchange rates the last year. I am living in the euro zone, so I measure my performance in euro.

Though one year is a very small time period for an investor with a long-term view, it is still encouraging that the portfolio performed well. To speak of it in terms of statistics: we still do not know whether our strategy is a good one, but the likelihood of it being a terrible one is lower than when we would have had a bad year in 2018.

Dividends

I hope I kept track of this well, but since the time I last wrote, the following companies in the portfolio had developments in their dividends:

Hannon Armstrong: The company did not hike its dividend, and it hasn't done so since the end of 2016. It still pays quite a generous dividend, and I am not worrying too much, but this reminds us that this is not a buy-and-forget company.

Ventas: The company increased its dividend by a token amount, with which I am disappointed. I wrote an article about this dividend increase to put it in perspective.

Consolidated Edison: The company reported a healthy raise in dividend payout, from $0.715 to $0.74 per quarter. This 3.84% increase is nothing spectacular, but for this company, the dividend increases need to be slow and steady. I am very happy with this increase.

New investments

As I did last summer, I am planning to invest €3,000 in shares to add to the portfolio this winter. There are always two possibilities here: add to existing positions or purchase an entirely new stock.

It is tempting to select bad-performing stocks which are already part of the portfolio and load up the truck when prices are low. The risk of this strategy is that the underperformance of those stocks might be justified. An additional risk is that your diversification might suffer. Nevertheless, I think the following stocks from the portfolio might be candidates to add to during this winter: Amsterdam Commodities, BASF and Eaton. These three stocks performed badly in 2018 and seem to have a good risk/reward at the moment. Other stocks which performed badly are Accell, Gilead Sciences and 3M. I will not add to Accell at the moment because the share prices are seem to be stuck at this level because there's a big buyer in the market (PON) which seems to be interested in taking over the company at or around the current price.

Gilead Sciences is a business which experienced some setback in the expectations for the company during the last year, and I am hesitant to add to my position because it could be a falling knife. 3M performed badly as well in 2018 and is a great company and investment. When I compare the company's valuation to others though, it still seems to be quite expensive, and I would prefer Eaton over 3M at the moment.

BASF is a very cyclical company which can and will likely drop further if this downturn worsens into a broad bear market. Still, I wouldn't mind to add to my position at this level. Amsterdam Commodities had some minor setbacks during the past year, including market expectations which proved to be a bit worse than assumed, and a very slight decrease in dividend. Still, it's not expensive at this level and it pays a very generous dividend (assuming it will not be reduced any further). Also, the company is only a small position in my portfolio and I wouldn't mind doubling it at this price level.

I am going to search for other options to invest in during the rest of January, but at this moment, my default choice would be to invest €1,000 in BASF, Eaton and Amsterdam Commodities.

Thank you for reading! If you have any ideas about my model portfolio or my future investment ideas, please let me know in the comment section below!

Disclosure: I am/we are long ALL STOCKS MENTIONED. 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.