My Portfolio September Update - 4 Buys

Bjorn Zonneveld profile picture
Bjorn Zonneveld
1.21K Followers

Summary

  • I made 4 transactions during the month.
  • Dividends were up approximately $55.
  • Forward dividend is now $779.

Spaarvarken, 3d Geef terug

Sezeryadigar/E+ via Getty Images

September is over and stocks took a hit this month. This brings us opportunities, but given the prices stocks were trading for, there is still some room to decrease in value. Nevertheless, I made a total of 4 purchases during the month of September.

For the people that did not read my previous articles: I am a 24-year-old investor from the Netherlands who is trying to start early so that I will have the option to retire early or at least earlier (the current retirement age is 67 in NL and is trending upwards). If you are interested in my previous articles on my portfolio, you can find them here:

September update

As mentioned above, I had 4 transactions this month. In 3 transactions, I added to existing positions, but I also started one new position this month in Alibaba (BABA). As most readers will know, the CCP has been targeting some major companies in the country, BABA included. This gives value investors a great opportunity to buy growth stocks at a value price. Some might argue that the CCP will eventually take away the stocks from foreign investors (by e.g. making the VIE structure completely illegal), but I disagree with that. China is the country with the highest amount of foreign direct investment (FDI) and creating an environment in which foreign investors might lose their money is not in their best interest.

During the month of September, I also started my journey towards a master’s degree at a university in my home country (the Netherlands). This will take approximately 2 years and as I mentioned in previous updates, I will use my student loan to invest. The reason for this is that 1) my tuition fee is a mere €524 for the entire year (approx. $610) and 2) the loan has an interest of 0%. My fixed costs I will cover with my student job.

In total, I added approximately $1150 this month. This is around the average I have been adding over the past few months. In the coming months, this might be a bit higher, due to higher dividends coming in. The minimum I will add every month is €965 (approximately $1120).

Transactions

Compared to last month, I did not make any changes to my rules (although this might change in the coming months), so the following rules are still in place:

Dividend growth

Value

Growth

Buy

  • ROE of 10+ or above industry average

  • Undervalued compared to 5-year dividend average

  • FCF must have grown in the past 5 years

  • Chowder rule of 12+ for normal stocks, 8+ for high-yield stocks

  • Dividends were raised (or kept stable for European companies, in line with the Eurozone Dividend Champions list maintained by Christophe Soulet) every year for at least the past 4 years)

  • Debt/Equity lower than 1.5 or Net Debt/EBITDA lower than average

  • Stocks that are severely undervalued vs. their past

  • Preferably pays a dividend

  • Investment-grade credit rating when market cap above 500m

  • Grow earnings by at least 20%

  • Reasonable debt levels (pref like dividend growth)

  • Expectation to turn net income positive in coming 3 years

  • P/S below 20

Trim

  • Overvalued by more than 20% based on dividend yield theory

  • Chowder rule high yield below 7 and other stocks below 10

  • P/S above 25

Sell

  • Cut dividend

  • Overvalued more than 40% based on dividend yield theory

  • Loses investment-grade credit rating

  • Chowder rule: high yield below 6 and others below 8

  • The position is more than 8% of total holdings

  • Opportunity no longer exists

  • Loses credit rating

  • No longer undervalued

  • P/S above 30

  • Not growing earnings by 20% for the last 2 years

1st of September

Alibaba - Bought 2 shares for $173.27 each: I have been looking at BABA for a few months now and due to the new rules and regulations of the CCP, the stock keeps dropping. At the end of the month, the stock dipped below $150. Nevertheless, you don’t get a lot of chances to buy a growth company at a value price. This position does come with a lot of risk as the CCP is probably not done with rolling out its initiatives, for a better future. As mentioned above, there are some authors on Seeking Alpha that claim that the CCP might hurt foreign shareholders, I don’t agree. The reason for this is that China is the country with the largest amount of FDI influx. During 2020, the country received $212 billion in FDI inflows, an increase of more than 10%. This is around 25% of total global FDI. If China would hurt foreign shareholders too much, FDI would most likely drop too. Thus, I do not think this is likely.

7th of September

AbbVie (ABBV) - Bought 2.2 shares for $109.03 each: In my August update, I stated that I did not understand the huge decrease in share price due to the additional warning on Rinvoq. The fact that all current JAK inhibitor drugs had to update this and that people are reliant on this drug, makes me think that the huge drop does not make sense at all. The fact that I don't think that the huge decrease is warranted and the strong dividend record of the company made me add to AbbVie this month.

21st of September

New Work SE (OTCPK:XINXF) - Bought 1 share for €219.50 ($254.83) each: New Work SE is a company that a lot of people might not know about. The company trades on the German stock exchange and does have a very illiquid ADR that trades OTC. The company is active in the HRM sector and owns multiple software platforms, the most notable being Kununu, Honeypot, and the German LinkedIn called Xing. Over the past few years (with the exception of the pandemic year), the company has been growing revenue at a rapid pace. The company’s revenue in 2016 was €145.9 million vs €300.1 million in 2020. At the same time, EPS also grew rapidly, but due to additional costs during the pandemic, the EPS was at the same level as in 2016. This has given us the opportunity to buy the shares at a steep discount to its normal P/E and P/FCF.

Associated British Foods (OTCPK:ASBFY) - Bought 13 shares for GBP 18.96 each: In September, I wrote an article about ABF which you can find here. In the article, I lay down the case for ABF. In my opinion, ABF is still trading at a steep discount, especially taking into account the diversity of its business model. However, due to the mandatory closures of Primark stores, the company’s revenue took a hit. This makes it look expensive on traditional metrics. Nevertheless, if the stores are allowed to remain open, the stock will quickly rebound and trade at its normal valuation.

Interactive Brokers (IBKR) - Received 0.15 shares: As I mentioned in previous updates, I switched to Interactive Brokers through a referral link. This means that I receive free shares whenever I put money in my account. I have to hold these for a certain time but I am not planning to add money to this position at the moment.

Company

Shares

Total price

Effect on dividend (pre-tax)

Alibaba

2

$346.52

$0

Abbvie

2.2

$239.87

$11.44

New Work Se

1

€219.5 ($254.83)

€2.59 ($3.01)

Associated British Foods

13

GBP 246.48 ($336.2)

GBP 0.81 ($1.10)

Interactive Brokers

0.15

$0

$0.06

Dividends

During the month of September, I received a total of $86.42 in dividends before tax, which was the 2nd largest amount in a month ever. This was up $55.02 YoY, but as my portfolio is still relatively small (below $40k), the majority is due to new capital put to work.

Company

Dividend 2020 (pre-tax)

Dividend 2021 (pre-tax)

Difference

Pfizer (PFE)

$3.04

-$3.04

Johnson & Johnson (JNJ)

$2.02

-$2.02

International Business Machines (IBM)

$3.26

-$3.26

iStar (STAR)

$2.42

-$2.24

Royal Dutch Shell (RDS.A)

€3.38 ($3.92)

-$3.92

Unilever (UN)

€5.75 ($6.67)

€5.98 ($6.93)

$0.26

Reinsurance Group of America (RGA)

$5.60

$7.30

$1.70

Visa (V)

$1.50

$1.60

$0.10

Intel (INTC)

$2.97

$3.82

$0.85

Enbridge (ENB)

$13.50

$13.50

Interactive Brokers

$0.11

$0.11

Prudential Financial (PRU)

$12.42

$12.42

Ahold Delhaize (OTCQX:ADRNY)

€14.19 ($16.45)

$16.45

TJ Maxx (TJX)

$4.16

$4.16

3M (MMM)

$7.40

$7.40

CBOE Global (CBOE)

$3.84

$3.84

NETSTREIT (NTST)

$2.60

$2.60

L3Harris (LHX)

$4.08

$4.08

Brookfield Asset Management (BAM)

$2.21

$2.21

Total

$31.40

$86.42

$55.02

Dividends September YoY Source: Author, Google Sheets figures in dollars after tax

With my September purchases, I added an additional $15.61 in dividends pre-tax. Additionally, W.P. Carey (WPC) raised its dividend again by $0.002, to continue their streak of raising dividends every quarter. However, due to the strengthening of the dollar, my euro dividends have become less valuable in USD. At the end of the month, this left me with total forward dividends of €673 ($779).

Company

Increase in dividend

Dividend per share pre-raise

Dividend per share post-raise

W.P. Carey

$0.002

$1.05

$1.052

Sector overview

Compared to last month, not a lot has changed. There are some slight increases in consumer staples, financials, consumer discretionary, and energy and some slight decreases in REITs, IT, and healthcare. However, the majority of the changes still stem from additional capital put to use.

Sector overview

Even though my position in REITs as a % of the total portfolio decreased, I continue to have a large position in real estate. The reason for this is twofold. First of all, due to inflation, real estate prices will continue to increase. This means that cap rates will most likely compress, but at the same time, this will increase the value of assets already owned. Secondly, and this might come as a surprise to some readers, REITs tend to outperform in times of inflation. As inflation has surged in recent times and I expect inflation to remain a bit higher in the coming years, REITs are set up to do well.

REIT performance inflation

Source: Wealthmanagement, NAREIT

Holdings

Company Qty Held Portfolio %
Reinsurance Group of America 12 4.08%
AbbVie 13 4.02%
W.P. Carey 18 3.93%
Aroundtown (OTCPK:AANNF) 174 3.61%
Vonovia (OTCPK:VONOY) 20 3.61%
Visa 5 3.40%
Prudential Financial 11 3.38%
Ahold 33 3.23%
TJ Maxx 16 3.14%
Enbridge 27 3.13%
Power REIT (PW) 21 3.09%
CBOE 8 2.91%
New Work 4 2.91%
Broadcom (AVGO) 2 2.87%
Altria (MO) 21 2.84%
Brookfield Asset Management 17 2.74%
CVS Corp (CVS) 11 2.73%
Boston properties (BXP) 8 2.64%
Fresenius SE & Co. KGaA (OTCPK:FSNUF) 19 2.64%
AvalonBay (AVB) 4 2.63%
3M 5 2.60%
L3harris 4 2.59%
ATCO LTD (OTCPK:ACLLF) 27 2.56%
Associated British Foods 34 2.50%
VICI Properties (VICI) 28 2.36%
Prosus (OTCPK:PROSY) 10 2.32%
Unilever 14 2.23%
StoneCo (STNE) 20 2.09%
The Hut Group (OTCPK:THGHY) 115 2.09%
Uniti (UNIT) 56 2.03%
DIC Asset AG (OTCPK:DDCCF) 38 2.00%
Intel corporation 11 1.75%
Jerash (JRSH) 78 1.62%
Tezos (XTZ-USD) 50 1.28%
Disney (DIS) 2 1.04%
CareCloud (MTBC) 45 1.03%
NETSTREIT 13 0.92%
Alibaba 2 0.85%
Hedera Hashgraph (HBAR-USD) 680 0.80%
Monster (MNST) 3 0.79%
Linkfire 191 0.55%
Interactive Brokers 1 0.23%
Bitcoin (BTC-USD) 0 0.22%
Binance (BNB-USD) 0 0.04%

Going forward

In the coming month, I will most likely add to my current holdings. I am not entirely sure if I will invest my minimum amount on my own portfolio, as I recently joined the student investment association. If the association starts investing in October, I will be left with less cash to put to work in my own portfolio. I might give updates about that portfolio as well, albeit as part of another article. As for my own portfolio, I am looking at the following stocks:

Fresenius

Fresenius is a diversified German healthcare company that provides services to hospitals, operates hospitals, produces biosimilars, among other things. I added the company to my portfolio a few months ago and after it initially shot up, the price has corrected to around the €40 level. Not a lot has changed since then and the company remains valued at approximately €8 below its pre-covid price. This makes the company rather cheap, as the company’s NTM P/E is currently at 11.6x compared to a mean of 15.7x over the past five years. Do keep in mind that this is a company with a strong balance sheet and low payout ratio (debt/equity of approximately 1 and a dividend payout ratio below 30%). Thus, in my opinion, you get a strong diversified healthcare at a bargain price.

Fresenius NTM PESource: Tikr.com

Monster

Monster is a company whose products I use on a weekly basis. The company offers energy drinks with vitamins, amino acids, and the taste is great. With continuous innovations and the increasing popularity of energy drinks, the energy drink market is expected to grow at a CAGR of 9.1% up until 2026, I view Monster as a good long-term position. Nevertheless, the company is not cheap by any means, as it trades at a P/FCF of 35.2x (vs a 5-year mean of 32.7x). However, given its impressive performance over the last few years, I am willing to add to my position at current prices.

MNST NTM PE + P/FCFSource: Tikr.com

StoneCo

A company that I might have held on to for too long. I bought the company's shares up till 36, held till in the mid-90s, and all the way back to approximately $35 at the moment of writing. The company is having some issues due to collateral leakage and this creates short-term risk. Nevertheless, the company is still growing its revenue very fast, although net income came in negative due to the problems with the collateral leakage. Additionally, the BRL has been on the decline for the past 5 years and this decline only got worse with the onset of the pandemic. However, in the mid-90s, the company was way overvalued and now that it came back to reasonable prices again, I am willing to add.

STNE revenue growthSource: Tikr.com

Chart
Data by YCharts

ATCO Ltd.

ATCO Ltd. is a company that I have been regularly buying this year and readers who have read my previous updates will know the reasons by now. I have also laid out my case in an article about the company in July. Not much has changed since then. The company remains very cheap and has only become cheaper since the article came out. The company is now trading at an approximate 31% discount based on the dividend yield theory. Nevertheless, with a chowder number of approximately 16.3, this is a great stock for dividend growth investors.

Chart
Data by YCharts

CareCloud

CareCloud is a telehealth company that grows its revenue through a successful M&A strategy. The company has grown revenue at 43.9% CAGR since 2016 and insiders own over 35% of the shares outstanding. I wrote an article about the company this month that can be found here. The company does come with some risks and might not be for everyone. However, if we would compare it to the largest telehealth company (which is Teledoc (TDOC), although not a perfect match, the company is way undervalued. I estimate the company's fair value to be at a P/S ratio of approximately 3 vs its current P/S below 1. This means that the company is severely undervalued and if it would trade at a P/S ratio of 3, it would trade at a price over $28.

Chart
Data by YCharts

Altria

The last company that is currently on my watch list is Altria. Most people either love or hate the stock and I am part of the first group. A lot has been written about the company and the major reason people love it is the dividend, and the reason others hate it is the decline in its main market, cigarettes. Although I do see the risks in the decline in cigarette sales and the fact that there has been a negative ruling in the IQOS case, the company is still performing relatively well. Additionally, the dividend remains well covered and the possibility to free up cash by divesting its BUD stake (although it isn't sure if they will, the lock-up period expires in October), makes me confident in the future of the company. Furthermore, the company remains heavily undervalued based on the 5-year dividend yield theory (approximately 17.2%) and its NTM P/E. Thus, it might be an ideal moment to add to this position.

Altria NTM P/ESource: Tikr.com

Wrapping up

This month I only made 4 transactions and this is below the usual amount of transactions. Nevertheless, the month was quite busy as I started the journey towards my master's degree. Dividends were back on the higher side again and increased by approximately $55 YoY. Forward dividends are now $779, and I hope to increase again during next month.

In October, I will join an investment group in the student investment association and this will bring me more ideas and will probably influence the way I consider investments.

I hope you liked the update about my progress, and I would love to hear your thoughts on my portfolio and what you would like to see in future updates.

This article was written by

Bjorn Zonneveld profile picture
1.21K Followers
I mainly focus on stocks that are unknown by the public and REITs. As for me: I am a BBA graduate who is pursuing a Master in Finance (MSF) at Erasmus University (Rotterdam, Netherlands) and work a student job in the real estate industry. My portfolio mainly consist of dividend growth stocks and REITs. Although I do have smaller positions in growth and value (non-dividend) stocks. My largest positions are: Enbridge, Abbvie and VICI.

Disclosure: I/we have a beneficial long position in the shares of ALL THE COMPANIES UNDER HOLDINGS either through stock ownership, options, or other derivatives. 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.

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