Ian's Million Fund, "IMF," is a real-money portfolio that I've written about monthly since January 2016 here at Seeking Alpha. The portfolio is a largely buy-and-hold group of ~130 stocks. Each month, I buy 10-20 of the most compelling stocks available at then-current prices, deploying $1,000 of my capital plus accumulated dividends. If things go according to plan, this portfolio, which began when I was 27, will hit one million dollars in equity in 2041 at age 52. I intend it to serve as a model for other younger investors.
I made the portfolio buys for this month on the 11th. The market didn't make it back to the March lows - at least not yet - but this recent drop was enough of a decline to grab my interest with the S&P retreating a fair bit from the highs at the end of March.
Many of the April buys were repeats from February and March, however, there are some new additions to the buy-list as well. Here's what I picked up:
For the dividends the portfolio earned in March, those are going back into Ecolab (ECL). As long as shares are below $200, I'm wanting to ramp this up to a major portfolio holding. Dominant business, great industry, underappreciated economic reopening/recovery theme, Ecolab is right-on-trend for the next year or two and also a compounder to hold for the long-term. There's very little I like buying more than long-term compounders that are currently discounted due to a short-term overhang.
For other returning buys from March, I still like the industrial companies such as 3M (MMM) and Honeywell (HON). Shares are up a little from my previous buys, but not enough to really move the needle. There were long stretches of the past five years where it was hard to find any industrial companies on sale, so I'm happy to start bulking up my sector exposure now.
Turning to Japan, the Japanese Yen continues its freefall, the Yen is down more than 20% versus the U.S. Dollar since the beginning of 2021.
This is a massive move for one of the world's largest currencies, and one which is generally perceived as a safe haven. Since March, in particular, the Yen has gone virtually no bid, as it declines almost every day.
How to benefit? I'm continuing to bulk up on my position in cosmetics maker Shiseido (OTCPK:SSDOY) during this period. With the Yen sliding, people buying with foreign currency get a big discount on their purchases. I'm also looking for additional Japanese stocks to start buying as well, though I haven't settled on other specific names yet.
The latter is of particular interest now as the long-feared Chilean constitution rewrite appears to be losing steam. In fact, Reuters reports it is now on the risk of failure as the population is having second thoughts about turning the economy in a more leftward direction. Polling now shows "reject" taking its first lead in the upcoming referendum on whether to go ahead or not.
I've never much worried about how these proposed reforms would impact demand for CCU's beer, wine, and soft drinks. However, other people were saying Chile was on the brink of falling into a hard-left government. It's becoming clearer by the day that those fears were way overblown. CCU stock, meanwhile, is still selling near five-year lows even as the Chilean economy is set to boom thanks to soaring commodity prices. CCU shares are at just 12x earnings and have paid out a double-digit dividend yield over the past 12 months.
In foreign stocks, I also added to Grupo Aeroportuario Centro Norte (OMAB). Admittedly I'm chasing this one a bit, as it's up from $51 to $58 over the past month. But it did dip from the $62 high it recently touched, and I'm not sure how many more chances I'll get on this one down here. The company is set for record years ahead as the Mexican manufacturing boom picks up steam. The lifting of the mask mandate for U.S. airlines is another incremental positive for North American air travel.
I also added to Rotoplas (AGUA-Mexico) (OTCPK:GRPRF) which sits at the center of three themes I like right now: Mexico, industrial companies, and water infrastructure.
Texas Instruments (TXN) is one I haven't touched since the spring of 2016. As such, the IMF portfolio had a cost basis of just $50/share in the stock heading into this month. Shares are now trading at $180, which is a dip from the $200 level it hit last fall. Still, it feels weird adding to a position with a $50 cost basis up here. There's definitely a sin of omission in not having added more between 2016 and today.
This company has given us very few chances to buy the dip over the years.
That being said, is the company a good buy in April 2022? My reason for holding off had been that semiconductors are a painfully cyclical industry historically, and Texas Instruments hasn't been immune to the downturns. I kept waiting for semis to have their usual bust, and Texas Instruments to decline with it. It never happened.
Perhaps Texas Instruments is less vulnerable to the cycle now. After all, it has largely exited faster-moving areas of the industry to focus on durable analog lines of products with less competition. The company has designed products for a zillion small niches, and these tend to have more stable demand than selling chips for something like smartphones where the technology changes every product cycle.
With the recent pullback, TXN stock is selling at just 19x forward earnings. That's the cheapest it's been in quite a while.
Perhaps that discount is justified. After all, the company is now guiding to a large investment cycle which will put a cap on dividend growth and share repurchases for now. And I might be capitulating from a sentiment perspective in adding to a stock that I already have such a large percentage gain on. But I've long wanted to own more of the company, and I don't see a major investment cycle as a bad thing either. So I'm willing to fade that bit of pessimism we're seeing around the company now.
I'm also interested in payments names this month. However, Visa (V), last month's buy in the sector, has bounced significantly. So instead, I'm going with Global Payments (GPN), which was one of the worst-performing S&P 500 stocks in 2021 and isn't faring particularly well in 2022 either:
The company is still up significantly over the past five years but is down sharply versus pre-Covid levels. The sudden multiple contraction happened over the past year as investors started to question the long-term terminal values of payments companies. With FinTech seemingly set to disrupt everything, investors got a case of cold feet.
Funny thing is that it's hardly evident that FinTech is winning either. PayPal (PYPL) shares have full-on collapsed over the past year, and other disruptors like Block (SQ) are also way down. It's not proving so easy to take out the established credit card and related merchant acquirer ecosystem.
This leads us back to Global Payments, which is now selling at 14x earnings:
Funny thing about those earnings too - they're growing at a double-digit rate. Analysts see Global Payments growing 17% in 2022 and above 15% each of the next two years as well. Just from the financial results, you'd have no indication that Global Payments was one of the worst-performing S&P 500 stocks of recent times out there.
Investors have put the whole payments sector on watch given the uncertainty in the sector (both around disruption and also global travel/reopening) but the financial results we've seen from the likes of Visa and Global Payments just don't justify anything close to the shellacking in these stocks. Global Payments recently added to its buyback authorization, and I hope they'll deploy it rapidly with shares at current levels.
Finally, there are the two bank stocks for this month. I wrote up a whole article on why I'm buying New York Community Bancorp (NYCB) again, so I won't rehash that take here.
For the other, TFS Financial (TFSL) is a misunderstood bank due to its mutual holding "MHC" structure. At a $16 share price, TFSL is currently at 12x earnings, half of the book value, and pays a greater than 7% dividend yield. I'll put up the slide below for more context on MHCs:
As the slide explains, the dividend only goes to the minority shareholders, which are just 19% of the total reported share count on financial screens. Also, as the company helpfully breaks out, actual EPS for 2021 was $1.34 per share.
That means the stock is going for around 12x earnings at the current price. Net income has been more or less flat for the past five years, so it's a pretty consistent 12x earnings as well - the bank isn't doing much to try to rock the boat. There is some asset growth, though, and rising interest rates may eventually result in a bit of a bump to earnings.
Also, as the company explains in that slide, the true book value per share (excluding the phantom MHC shares) is now up to $32.63 - it was back at around $23 per share when I started covering this company a few years ago if my memory serves me right; a lot of value creation is occurring on the balance sheet. The dividend isn't the only way shareholder value is being generated. 7.2% dividend yield and significant upside whenever the bank converts from an MHC to a regular structure bank is plenty to attract my interest.
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Ian worked for Kerrisdale, a New York activist hedge fund, for three years, before moving to Latin America to pursue entrepreneurial opportunities there. His Ian's Insider Corner service provides live chat, model portfolios, full access and updates to his "IMF" portfolio, along with a weekly newsletter which expands on these topics.
Disclosure: I/we have a beneficial long position in the shares of ALL THE STOCKS IN THE TABLE 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.