The Brown Bag Portfolio February 2020 Results
Summary
- Market enters correction territory over coronavirus fears.
- Panic isn't a strategy.
- A gut-punch to the BBP.
- Strategy going forward.
Wow. I started the Brown Bag Portfolio on July 5, 2016, and began writing about it a year later. Although I've seen my holdings go up and down, for the most part, it has been a steady rise. Due to my inexperience and overall enthusiasm the first six months or so, after I started my portfolio, I made a lot of beginner mistakes. I chased stocks up, panicked when they came down and sold at a loss. I discovered that the ease of being able to open a brokerage account and trade stocks did not make it easy to make money, especially when emotions get involved.
I went and searched for information and I found a great deal of it here on Seeking Alpha. That was when I truly discovered the strategies behind investing and actually learned that what I had been doing was trading, not investing and what the differences were. One of the most valuable pieces of information that I discovered and took to heart was dividend investing. That reoccurring payment, whether it be monthly (love monthly) or quarterly, has gone a long way towards soothing my mental waters and ride out the fluctuations in the market.
However, I had never experienced a correction like the one we just had. Actually, we are probably still having it and may continue to for some time. Watching positions that were showing at 25%+ lifetime return suddenly plummet into a negative return is difficult and if I hadn't learned what I had over the past four years, it would probably have been enough for me to panic and cash out. I didn't, mostly because I utilize DRIP (dividend reinvestment programs that automatically purchase additional shares when the dividends pay) and I'm invested in companies that I believe will produce strong results in the long term.
Panicking here would only lock in my losses and as anyone who has been in the market for any length of time should know, panic is not a strategy. I expect that it may take some time for many if not all of my positions to recover. There will be some damage to supply chains, China's economy may very well be severely damaged, President Xi may discover that being the dictator for life may not be as long a ride as he envisioned. Authoritarian nations have a history of violent internal reactions to perceived weakness. Global economic growth may slow or stall, we don't know and we won't for some time.
There are, however, several things to keep in mind. The media is treating coronavirus as if it were an outbreak of Ebola or a revisiting of the Black Death. It isn't, unless it mutates into something entirely more fearsome. But panic and fear sell and while the media loves to present itself as the all-knowing purveyors of truth, sadly we have learned that there is very little truth being spouted these days. Perhaps there never was. Anyone else remember their college courses discussing Yellow Journalism and the unbelievable partisanship of the early 20th C newspapers? It seems that the relatively recent belief in a neutral press was the outlier, and sadly not the norm.
I'm not suggesting that people ignore the news about the spread of the virus. I'm suggesting that we need to keep things in perspective. So far, although the spread of the virus itself is frightening, its effects are much less so. The elderly, the very young, and those with compromised immune systems should be concerned and careful, just as they should be with influenza and they should take the same precautions. But for the vast majority of people, especially those in the first world, this will pass with relatively few effects upon their health. We should be aware that supply chains may very well become disrupted and take some precautions, stock up on some extra food and water, but don't panic.
I live in a hurricane zone, so the idea of expanding my emergency supplies to two or three weeks of necessities isn't a foreign idea, but for many people, it may very well be. Down here in Florida, we generally keep enough supplies on hand to ride out a week or two without power or easy access to a grocery store. They may not be needed and if so, we rotate the older cans out and some things that I don't normally eat find their way onto the dinner table. It happens. Life goes on.
Now then, back to the money. I did make one sale this week, just before things got really bad. I sold out of my position in Blackstone Mortgage Trust (BXMT). I sold close to their 52-week high for the simple reason of locking in my profits. I like the company and I fully expect to re-enter sometime in the near future, but I wanted some cash to fill out some positions that were not holding up nearly as well. I used most of the money to make several more purchases of DOW Inc. (DOW), which was a mistake only in the fact that I could have waited another day or two and purchased the shares several dollars lower. I did, however, lower my cost basis by more than a dollar and if they stay depressed for a while, I'll add more.
DOW is one of those stocks that will be greatly affected by a slowing global economy and may very well stay below my new cost basis for a year or more. That's fine, as long as the dividend keeps paying at the current rate ($2.80 a share), I'm content to give them a few years to recover fully. I wanted to build a position to between 80-90 shares and I currently hold 82 so I don't feel much need to actively add to my position, but we'll see. I may decide to bring the total up to 100 over the next couple of months if I don't perceive better opportunities elsewhere.
BXMT has now fallen below my original cost basis and if it continues to fall, I will initiate a new position there again. They may have to wait a little, as a number of my holdings are currently at truly mouth-watering levels and I'm more likely to try and add to them before starting a new position in BXMT.
BBP in Feb
The Brown Bag Portfolio was punched in the gut over the past week and a half. There's really no other way of stating it. Outside of my sale of BXMT that I outlined above, I added to DOW and opened a position in the Nuveen Credit Strategies Income Fund (JQC). Timing wasn't good. I could have purchased the shares I received in DOW several dollars lower had I waited and even the risky purchase of the closed-end fund JQC would have benefited from waiting. Oh well, I can't do anything about that now. If the market continues to head south, I may repeat that mistake when I add to my position in Main Street Capital (MAIN) or Enterprise Partners (EPD), but I've learned that I can't time the market. I purchase when the price appears to be good and if I make a mistake, then I can live with it. I am confident that in the long term, prices will recover.
So, without any other adieu here's how my portfolio fared during February:
Brown Bag Portfolio | February 2020 | |||||
Name | Ticker | Shares | Value | %Return | Div/Shr | Annual Div |
DOW, Inc. | 82.26 | $3,324.05 | -16.89% | $2.80 | $230.32 | |
Apple Hospitality | 240.70 | $3,145.95 | -25.40% | $1.20 | $288.84 | |
Enterprise Partners | 255.30 | $5,958.66 | -13.01% | $1.78 | $454.43 | |
AT&T | 113.48 | $3,996.59 | 2.38% | $2.08 | $236.03 | |
EPR Properties | 78.31 | $4,639.32 | -11.63% | $4.59 | $359.46 | |
Main Street Capital | 80.45 | $2,970.94 | -3.93% | $2.46 | $197.90 | |
British Petroleum | 72.27 | $2,261.33 | -21.44% | $2.52 | $182.12 | |
Newtek Bus Srv | 51.25 | $971.64 | -14.90% | $2.19 | $112.23 | |
Eagle Point Credit | 53.62 | $721.20 | -15.41% | $2.40 | $128.69 | |
Oxford Lane Capital | 199.75 | $1,611.95 | -17.15% | $1.62 | $323.59 | |
NB RE Sec | 100.70 | $500.45 | -10.77% | $0.48 | $48.33 | |
Clough Global Op | 82.62 | $741.93 | -0.66% | $1.07 | $88.40 | |
Ivy High Income Op | IVH | 51.29 | $677.47 | -0.97% | $1.20 | $61.54 |
Nuveen Credit Strategies | 100.00 | $693.00 | -7.60% | $1.10 | $110.00 | |
Total | $32,214.49 | -12.58% | $2,821.89 | |||
Div Goal | % Goal | BBP Yield % | 8.49% | |||
$16,800.00 | 16.80% | |||||
Div Goal 2020 | % Goal | |||||
$3,360.00 | 83.98% | |||||
As expected, my lifetime returns fared much better than the monthly chart but still show a negative overall.
Lifetime Returns | ||||||
Symbol | OOP $ | OOP Shares | Shares frm Div | Div Received | Current Value | Total Rtrn |
DOW | $3,985.55 | 82 | 0.258 | $14.00 | $3,324.05 | -16.60% |
APLE | $3,618.28 | 205 | 35.700 | $597.89 | $3,145.95 | -13.05% |
EPD | $5,766.99 | 215 | 40.298 | $1,076.77 | $5,958.66 | 3.32% |
T | $3,453.42 | 100 | 13.475 | $450.02 | $3,996.59 | 15.73% |
EPR | $4,733.85 | 71 | 7.314 | $516.16 | $4,639.32 | -2.00% |
MAIN | $2,712.80 | 71 | 9.448 | $368.85 | $2,970.94 | 9.52% |
BP | $2,791.50 | 70 | 2.270 | $87.26 | $2,261.33 | -18.99% |
NEWT | $1,109.50 | 50 | 1.247 | $28.40 | $971.64 | -12.43% |
ECC | $801.00 | 50 | 3.621 | $51.41 | $721.20 | -9.96% |
OXLC | $1,572.00 | 160 | 39.746 | $373.47 | $1,611.95 | 2.54% |
NRO | $557.00 | 100 | 0.695 | $4.00 | $500.45 | -10.15% |
GLO | $722.00 | 80 | 2.620 | $24.89 | $741.93 | 2.76% |
IVH | $666.50 | 50 | 1.285 | $17.67 | $677.47 | 1.65% |
JQC | $749.50 | 100 | 0.000 | $0.00 | $693.00 | -7.54% |
Total: | $33,239.89 | $3,610.79 | $32,214.49 | -3.08% | ||
Strategy going forward:
Personally, I don't think we've hit a bottom yet and that the market may continue to fall, but I'm not going to stop purchasing. I can't predict when or where we'll hit a bottom, but I don't expect my main positions to collapse to zero. Instead of looking to initiate a new position in anything, in particular, I will be concentrating on adding to my current positions. I would expect that March will see additions to MAIN as I'd like to add 10-20 additional shares at these prices. I would also like to add to EPD if I still have money available. I may also nibble at a couple of my funds that are below my cost basis. Much will depend upon how much money I've got available to invest and where things stand at the time.
We may see a bit of a bounce next week, but I'd be surprised if things go green for an extended period of time. I suspect that the next quarter will remain choppy, much of it depends upon the news cycle. I'd advise not to overreact on either good or bad news, I suspect that we'll hear much of both over the next few weeks. But since I'm not trying to time the market, I will continue to purchase throughout March, increasing my positions in companies that I expect to have strong long-term results.
Thanks for reading and good investing!
This article was written by
Analyst’s Disclosure: I am/we are long DOW, APLE, EPD, EPR, T, MAIN, NEWT, BP, ECC, OXLC, NRO, GLO, JQC. 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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Recommended For You
Comments (29)
Markets don't know what to expect so their selling off.
With this being a election year brings just more uncertainly and if a Dem is elected massive selloffs. That recession they have been taking about will be reality.
I want to buy but am holding off feel more pain is coming.
I own some of stocks you have or similar ones it's just been plain bad lately.
Be very selective now quality matters more now than ever
Anything travel related oil are becoming no mans land the yields keep climbing and stocks keep dropping I'm waiting it out.
Good Luck just don't jump out to fast buy small positions.
Thanks for the monthly write up. I know some of my holdings deserved a pullback aka v and msft. I was kinda pissed when main went down almost 10% last week. I had had a gain for months but went negative even just for a few days. I wish I had more money because I would add to just about ever holding maybe minus bac. So v, msft, main, csco, pg, xom, Dow, jnj, bmy, utx. Oh well! If I can get a new job, I will add to a probably 2 of them that are most attractive at the time. Tax return might add a 3rd. Like you, I’m just trying to add to positions. Good luck!
Jason
2021.
