New Buy: Ventas, Inc.

Keeping with our plans we purchased 19 shares of Ventas, Inc. today at $53.15. We also sold our 16 shares that we received from Care Capital Properties, the spinoff from Ventas, Inc. We will likely execute another trade for Ventas, using the CCP cash to purchase more VTR. Any new money we have from here until December will go to Ventas unless another company in our portfolio appears more attractively valued. As it stands, Ventas is trading at the biggest discount among our companies that don’t have commodities exposure. Feels good to have made this purchase and we will be looking to own plenty more between now and December 31. The prospect of higher interest rates has pushed the share price down significantly this year and for us that has presented us with what we think is a tremendous buying opportunity. We will keep buying until we feel we own enough shares to help us meet our longterm goals.

In other news, we watched the Apple event yesterday and as investors we were pleased to see a great lineup of products rolling out just in time for Christmas shopping. If I were a betting man I’d say Apple’s Q4 earnings will be very satisfactory for investors. I hope in the future Apple may move into producing original content but until then Apple TV with its new features appears to be a device that will sell well. I particularly liked the feature where you can say “What did she say?” and the video automatically rewinds 15 seconds and adds captions. Incroyable! In any event, let’s hope consumers continue to buy Apple products so earnings can grow and we make shareholders like us happy.

Long: Apple, VTR. no position CCP.

September Portfolio Update.

Team work make the dream work. As awesome a time as I had getting married I pray I never have to do it again.

A photo posted by Lome2Mobay (@lome2mobay) on

August was an incredibly busy month for us. We finally had our wedding ceremony which was both the happiest and most stressful day of my life. All in all it went better than we could have planned. Lots of laughs, a few tears and plenty of champagne.

Once the wedding was over we got back home and rested for almost a week and a half before really turning our attention back to our investments. For the most part, we tuned out the noise and just kept pushing. A few highlights:

  1. We earned $312.15 in dividend income in August.
  2. We upped our investment in Apple to 280 shares and Gilead to 100 shares.
  3. We added quite a few great dividend payers to the portfolio.

We are turning a philosophical corner on investing, I think. Time and again we ask ourselves where’s the best place for our money and I think the experience of the last six months have taught us a few good lessons. The most important perhaps is to downsize. We decided we are going to trim our portfolio to simply companies we think are “best in class.” For example, we own HCP, OHI and VTR. That strikes me as redundant and we settled on the idea that of the three healthcare REITs VTR is the best of the lot and we should focus our money on them. As a result we will be selling our holding in the other two. The same goes for our pipeline holdings. We have MMP, EPD and OKE. We will sell OKE and keep MMP and EPD as we think both of those companies are better run and provide much better coverage for the dividend. We will wait until the end of the year to move some of these as we will either try to harvest losses or sell for minimal gains.

Over time, I think our model portfolio will look something like this: GILD, AAPL, MMP, EPD, O, VTR, PM, KO, WFC, JNJ, CMP. There may be one or two names that escape me right now but I think we won’t balloon much beyond these names for the next few years unless we find an exceptional opportunity. There are lots of great companies to invest in but we think these are the ones we want to hang our hats on and build out really strong positions. We may add more names at some point but the focus now is to purchase more VTR with any new money we have between now and the end of the year. The price is really attractive given how we feel about the longterm prospects. At the current price I can see us getting up to 250 shares if these prices hold until the end of the year.

We are still learning and the ride has been great. Our portfolio is down on the year mostly because of the oil industry where the majority of our losses are concentrated. We won’t panic and sell off all our energy stocks but we would like to limit our exposure over time to just two of the midstream holdings. We will see how it goes from here.

Recent Buys

For longterm investors yesterday was the best day to go shopping for shares of high quality businesses in a long time. We saw the prices that some of the companies we were interested in and couldn’t resist. I had a long chat with a good friend and our conclusion was to buy more of everything we own if we could and also make new additions. Here’s what we did:

 

Apple: We bought 165 shares of AAPL at 97.13. We made our first purchase of AAPL at 131 so the ability to average down this much was something we couldn’t pass up. AAPL is now our largest exposure.

Caterpillar: We bought 30 shares of CAT at $73.95.

Diageo: We bought 28 shares of DEO at 103.81.

Chevron: We bought 19 shares of CVX at 74.94.

Amerigas Partners: We bought 35 shares of APU at 43.67

All in all we felt these were good purchases of quality companies that were selling at a discount to our fair value estimates. If the market drops another 500+ points today we will buy more. Our time horizon for our portfolio is 20+ years so a nosedive in the market like is currently happening is great for us to purchase more shares at a discount with higher dividend yields than we normally would be able to get. In times like these you have to block out the noise and focus on your objectives. For us that objective is to have a portfolio value of $2 million with a dividend yield of 4% in 20 years. We feel that these purchases bring us ever closer to that and our hope is that fear about what is happening in the Chinese market causes more havoc in the markets and presents us with more opportunities to buy quality companies at discounts to their fair value.

 

Long on all companies mentioned.

Welcome Back.

Ahem, is this thing on? We’ve been gone for a while. That tax hit at the middle of July took a lot out of us but we still managed to get a few things done. Here’s how we’ve been:

 

  1. We sold our shares in Chesapeake Energy. They cut the dividend and we cut bait. We had a realized loss of over $500. That’s a real sizable loss but a good lesson learned. Still don’t feel good about it.
  2. We bought 95 shares of WP Carey. That’s a purchase that cheered us up. Good company, solid earnings, nice dividend and dividend growth. The share price keeps falling even with solid earnings. This means we will buy more.
  3. We bought 17 more shares of Magellan Midstream Partners. The dividend was raised and the market reacted with the share price continuing to fall. Even good companies with strong balance sheets are getting eaten up with the oil sell off.
  4. Finally, finally, we are back in on Gilead. We own 41 shares. Cost basis of $111. We feel great about this purchase. Earnings are great, management increased guidance and the company is sitting on piles of cash for an acquisition if the right target is identified. I like how this story is developing. Looking forward to being a long term shareholder in this company.
  5. We sold another one of our holdings and now have over 100 shares in AAPL. As the share price continued to fall we kept watching and they scooped up shares at $116. Earnings are up but people are disappointed in iPhone sales and the fact that Apple is no longer the largest smartphone seller in China. Their fear turned into what we thought was a good bargain for us.
  6. We added to our Loyal3 purchases of Coca Cola and Intel, a total of about $1,200 split between the two of them.
  7. We would love to add shares of XOM to our portfolio and CVX but we are out of money and aren’t sure if we’ve hit bottom yet on these companies. Don’t want to try to time the market but also want to be mindful of where the market is trending. We will see if the buying opportunity remains when we have money. We’d also love to purchase shares of TD Bank for our portfolio and the share price looks attractive at the moment.

The biggest news of all is that we are finally having our wedding ceremony on Saturday in Paris. Fun times ahead this weekend. Once the smoke clears we can get back to blogging with proper, timely updates. Hope everyone is doing well.

Paying the Tax Man.

taxes-due

Today I received a tax bill from the IRS for my 2014 taxes. It was a hair above $12,300 dollars. I paid it immediately. The last person I want on my back is Uncle Sam. Unfortunately, having to pay that much in taxes at once and unexpectedly means that our investment activities are done for the rest of the month and potentially the rest of the summer. In theory we could have asked for some kind of payment plan but I dislike having any outstanding liabilities with the government. I have a built in aversion to any interaction with the tax man or law enforcement. The less I have to do with them the better. So I complained for a few minutes then paid it.

As far as I know, Americans are the only ones required to pay taxes when they make their earnings abroad and live abroad. My wife carries a French passport. She hasn’t lived in France for over a year. She pays no French taxes on her earnings.

I understand those who find this kind of long arm taxation to be a bit of government over reaching, particularly as no other country has a similar tax regime. I respect that position but I feel slightly different.

For the first 28 years of my life I did not have an American passport. I remember how difficult that was. When I traveled to foreign countries on my Jamaican passport I was always bombarded with questions. What are you doing here? When are you leaving? Prove to me you have the money to pay for your hotel. Once, in Munich, an officer approached me at the hauptbahnhof and escorted me to a back room where I was interrogated then he wrote in my passport that if I was found in Munich after the weekend was over I could be arrested. I was studying in Paris at the time and returned to Munich to spend the weekend with a girl I met at Oktoberfest. Not even the threat of arrest could get my to go back home without seeing her. Young and dumb.

Since February 6, 2009 when I became a naturalized American citizen everything changed about my travel experiences. No one even double checks my passport at the border. At times, they stamp my passport without even checking to see if I have a right to be in the country. It truly is a privilege for me to be an American, particularly as my mother came to America illegally in 1983, leaving her five children behind in Jamaica. It would be seven years until I lived with my mother again. All of this is wrapped up in my American citizenship. I see it as perhaps the best thing that’s happened to me. I see the difference in the course of my life and those of my cousins who remained in Jamaica. There was no difference between us growing up. We had similar grades. We were from the same neighborhood. We had the same economic status. The only difference was that I had an opportunity to live in America and they did not. That opportunity offered me a chance to go to some of the best schools.

Even when my mother could not afford to pay for me to go to college there were so many scholarships available for a young black kid in 2000 who had good grades and a high SAT score that it felt that programs like the Gates Millennium Scholars Program were literally begging me to take their money. I became a lawyer and worked in New York. In law there are few things that carry the same weight as “my New York lawyer is on the phone.” After four years in New York I decided I wanted to go live in Paris and try something different and it was my American passport that allowed me to do so. I could not have simply picked up and moved to Paris on a Jamaican passport. I reap the benefits of being American everyday, even when I’m not in America so I have no problems paying my taxes so long as that’s what the tax regime is. I do believe that those living abroad should have a reduced tax burden but that’s splitting hairs. I know for sure that if something happens President Obama will send in a group of well trained military men to come find me. I may not use the federal highways everyday but still I am benefitting from being American.

Those who were born American may feel differently and might find the system unfair. To them I say “you have a point.” That’s a fight I cannot fight with a good conscience after benefitting so much from being American. I’ve seen both sides of the coin. Being American is awesome. If paying taxes while living abroad is the price to pay so be it.

Naturally, I would prefer to put that $12,300 into our investment account. That’s a lot of money to give to the government when I’m neither working for an American company nor working in America. But then I think to myself, would the company have hired me if I wasn’t American and I didn’t have the benefit of attending one of the five best law schools in the country and I didn’t have an opportunity to work at one of the five or so best firms in New York? True, there are others who work with me who do not have that profile but I don’t know if a kid from Jamaica who had never left the island would be where I am today. So instead of buying shares in Gilead or Kraft-Heinz or a slew of other great investment ideas that money went directly to the government.

The funny thing is, I wouldn’t be able to invest in those companies directly if I wasn’t American or at minimum a permanent resident. No one likes paying taxes but it’s a fact of life. As my wife said when I was complaining, having to pay so much in taxes means you’re really blessed. It means you also earned a lot last year. So, yeah, there you have it. No more investments for us for maybe the next six weeks. We will find other interesting things to say here but no more “New Purchase Alerts” for a while. We will still be updating, looking at our watch list and the like. We will also keep our monthly allocation of $588 on Loyal3 to Coca Cola and Intel but not much else. God bless America.

Early July Portfolio Update.

New Buys July has been a busy month for us and it’s only been 11 days. First up was adding Compass Minerals to our portfolio (18 shares) then we opened a Loyal3 account where we split $588 between Intel (11.2107) and Coca Cola (6.3259). After those new purchases we started adding on shares to companies […]

New Purchase Alert: Philip Morris, International

Piggy_Bank__OINK_V2_by_D_Money_16

We’re back at it. It’s looking like July is going to be really active for us. We have extra capital from my solo legal practice and whenever money from the practice comes in we invest it directly into our investment account. Multiple streams of income is the way to go in our house. I have my day job working as a lawyer at the African Development Bank and then I moonlight assisting some of my old clients with issues they are facing. My wife also has two streams of income as she works for an investment fund focusing on agriculture and also has a business selling clothing and accessories for women and a few male items. They’re on sale at www.gadgetkloset.com. She ships globally. I find that our income diversity is similar to diversity in an investment portfolio, by keeping earnings coming in from different sources we are less vulnerable to either of those single sources if the funds ever dry up. So far this year it seems the faucet is running. I’m earning more than at any other time previously in my life and I feel truly blessed but arriving here wasn’t easy. I had to go through the wilderness for three years of uncertainty, sleeping on floors, living out of my suitcases, not having my own place, all that good stuff. But it was all worth it. We’ve arrived at a little stability. We have semi-predictable earnings. This can change at any moment so what we do with the money while we are earning it is very important. For now, we are investing aggressively. We have no children. The only debt in our household is my law school loans. We have no extravagant habits except for traveling. So the time is now to stash money away before children arrive or any other unexpected expenses get to us.

When I got a check yesterday from a client of $2,717 I put it all into our dividend investment account. It’s money that was long overdue. It was for work I did last June and I’m now just being paid. Sometimes clients are like that. They want the work but when it’s time to pay they always have a good reason. Either way, we’re thankful the bill was finally settled. So what did we do with that money we waited on for a year?

We bought more shares in Philip Morris International.

 The Trade:

Purchase Price: $81.65

Number of Shares: 33

Commission: $7.95

All in Costs: $2,702.40

Dividend: $4

Yield: 4.9

We previously owned 12 shares in PM and this brings our total shareholding to 45. We had been holding back on purchasing more shares for some time now as we were looking to build out other positions but as with our purchase in KO and INTC we wanted to return to investing in consumer products as we felt we had too much exposure to energy.

Philip Morris, the world’s largest cigarette company, is a spinoff from Altria Group. While Altria focuses on domestic markets, PM focuses on international exposure for its many cigarette brands. Smoking is growing in international markets and even in markets like Europe where e-cigarettes are all the rave PM has introduced e-cigarette products to remain competitive. Anyone who knows anything about the nature of PM’s products knows that earnings are fairly predictable because of the addictive nature of their products. In spite of this, PM faces considerable currency headwinds. As a business making all its sales abroad, the repatriation of those earnings take a significant hit in the current climate due to the strong U.S. dollar. But as I’ve said before that’s something that neither you nor I can control. The dollar may weaken tomorrow or it may strengthen. All I know is that PM has a strong fundamental business and continues to grow sales. Its market share has grown this year and in almost 75% of the markets where PM does business they have the number one or two brand in those markets. Currency headwinds be damned, those are numbers I like. We will keep an eye on things but there’s a good chance we will build out this position a little more if the shares drop significantly. For now though we are happy with our 45 shares. The new 33 shares add $132 to our annual dividend income.

Once again, we are super happy with this buy and hope that the multiple streams of income continue to bring money into our house. We recently bought 30 hectares of land to start a family farm. We would like to start a chain of grocery stores in my wife’s country. One day it will all come together for us but our entrepreneurial streak is a major asset for the two of us. Always looking for new ways to grow our earnings so we can get out from under the system of wage earning is one of the main things that drive us both. Until then we will keep investing in our dividend growth portfolio and hope to reach our goals. The road to our first $100,000 continues. As of today we are at $67,000 I think. $33,000 to go and then we will set a new goal.

Disclosure: Long PM, KO, INTC.