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Brief Update On What I Own

I did my annual Portfolio change today. I had owned GILD - a dividend paying bio tech that had the dividend coverage to support a high CAGR (Compound Annual Growth Rate) projection - but not the projected EPS growth to support a high CAGR. GIL was projected to solve the forward growth problem via acquisitions. It had not. It was becoming more of a lottery ticket than an investment. I replaced GILD with BDX - while adding MDT to my health care sector. I project that I will be buying BAYRY (ADRs for German company Bayer) and JNJ as I get older and desire a higher level of safety and yield.

HRL had been very, very good to me. For one and a half years it lacked EPS growth in the forward projections. It still may have the dividend coverage to support a high CAGR. I may be pulling the trigger too quickly. But HRL still sold at the low valuation (or yield) of a high CAGR stock. Anyone with my informational resources should seek to sell when valuations become out of line with forward projections - not after they valuations have already adjusted. I replaced HRL with DPS. I project that I could be buying CPB and KMB as I get older and desire a higher level of safety and yield.

I added high CAGR FDX to my transportation (or industrial) sector for both growth and diversification. I may regret not also buying JBHT and LSTR for even more growth and diversification - but I currently need more yield than growth. I added moderately high CAGR ACN to my tech sector holdings. If I needed more growth than yield, I would have also added AVGO.

I turned 63 earlier this month. I need to morph towards an older guys portfolio - buying some safer and slower growing stocks. I added T for yield and JCOM (which may be more tech than tele com) for growth to begin my Tele-com sector holdings. I will probably buy more T and begin buying VZ over time. I do not own any electric utilities - and that omission may be corrected over time. It is just as likely that I could choose to purchase preferred shares selling below par to get the same type of result.

My current holdings:

REITs - FRT, SPG, TCO, O, UE, VNO, AVB, UDR, CCP, OHI, VTR -- (small allocations in UE owned via VNO spin-off and CCP owned via VTR spin-off - small intro allocations to FRT and SPG)

MLPs - EPD, GEL, MMP, MPLX, PAGP, PSXP, SHLX, TLLP, TRGP, WES, WMB, VTTI (atypical 4.7% allocation to MMP and 3.0% to MPLX due to high ownership of MWE)

Banks & Financials - BOKF, CFR, PB, USB, VISA, WFC

Consumer Staples - CL, DPS, GIS, HSY, INGR, PEP, PG, SJM


Energy & Mining - BBL, SOUH, XOM


Tele Com - JCOM, T

Industrial - HON, UTX, PKG, WRK, FDX, NSC, UNP


The above combination of components generate a current yield of 3.93% and year over year income growth of 5.5% in the first year - with growth projected to increase roughly 16 bps per year yield (on current investments) projected to increase roughly 25 bps per year. This has been a very small turn-over portfolio.

Instead of buying more bonds to generate more yield - I chose to begin taking regular withdrawals from some of my mutual funds at the withdrawal rate of 5% per year. I am retired - but have not started to take social security. I project that I will wait till I am 65 to start social security. Mutual funds are still 29% of my holdings. I currently expect to eliminate withdrawals once I start social security.

I believe I own what I want to own - as opposed to a collection of "last year's best ideas" created by inertia. That unflattering quality assessment is what I would have called my portfolio prior to 2010. To get the yield I currently need, I do own more BDCs and MLPs than are ideal. My MLP weighting is 16.40% and my BDC weighting is 7.7%. I would call the ideal weightings 10% and 5%.

As a result of the high BDC and MLP weighting, My total investment grade investment dollars are 80% of the total. They are 76% of the number of investments. Investment grade dollars are 68% of the total income. I would call an ideal weighting of "investment grade dollars to income" close to 85%. If BDCs MRCC and PFLT were to be credit rated - I would expect them to merit investment grade ratings - and my percentage of investment grade dollars would grow to 75%. If it were not for that expectation - I would call my "68% of income" number a major flaw in the portfolio that merits urgent correction.

Some of you will look at my holdings for ideas for addition to your own portfolio. I would call the two biggest ideas of this post is for you to (1) know your portfolio income CAGR and (2) know the percentage of income from investment grade rated sources. My life experience is that one "gets the result for which you plan (and implement), not the results for which you desire". I invest with CAGR and RRR (Required Rate of Return) awareness to create a decent plan.