Portfolio update February 2021, a few new investments and a Dividend Aristocrat ETF

 February was an interesting month, stocks went up an then came down as long-term interest rates started to rise. For me, the interest rate changes are not that important, even if it impacts companies negatively with higher financing costs. GameStop was still a topic discussed in Financial media as the stock rose again at the end of February. Covid is still not beaten and Biden with Congress approved a new stimulus package.

My portfolio rose a bit in February as January ended in a large decline, January ended at +1,54% while February landed at +4,78%. There were a few increases to positions made and also a few new investments. One driver to the increase was People's United Financial which will be acquired by M&T Bank, will receive approximately 9 shares in M&T Bank and some change given that the acquisition is approved. Did not expect People's to be acquired this soon, yet based on its valuation it was an attractive acquisition object and now M&T Bank will get it at a decent price. For more details you can check People's and M&T Banks Investor news as well as barrons.com

 

 During February my portfolio received 66,36€ in gross dividend and 56,57€in net dividends. AT&T represented over 50% of dividend in February which does highlight the risk in case they have to postpone dividend payments or decrease it. People's United Financial was the second biggest with 13,31€ gross and 11,31€ net. So far this year I have received 246,39€ in net dividends and the biggest parts are still to come.

Changes to portfolio

New investments

Bought 1 share in SPDR S&P Global Dividend Aristocrats UCITS ETF at 27,01€ including transaction costs. The idea is to increase this position over time and most likely also buy in the US Dividend Aristocrat ETF for long run. Will also buy the individual companies from time to time and waiting for the market to drop a bit in order to increase these positions. Wrote about dividend aristocrats back in December 2020 and now decided to invest in one ETF holding these known and proper companies. Link to post.

Fresenius AG was added to my portfolio, 4 shares at 35,03€. It represents 0,32% of my portfolio at the moment. A short introduction to Fresenius AG, it is a medical company and one of the largest shareholders of Fresenius Medical Care is a renal disease focused company. It owns Fresenius Kabi a mainly transfusion company focused on seriously and chronically ill patients. Fresenius Helios is a private hospital operator in mainly in Europe but also a few hospitals in Latin Amerika. Fresenius Vamed is a project management company focused on health care facilities. 2020 Reported earnings per share was 3,06€ vs 3,38€ 2019 this gives the company a P/E-ratio of 11,61 and equity ratio was 39%. Compared to many other medical companies I find Fresenius at value in the long run as most likely Covid will be beaten at some point.

Bought a bit of Handelsbanken Latin Amerika fund for 30€ as the market has been heavily hit by Covid, this increases the upside potential once vaccines have been distributed and people can return to a more normal life.

Old positions

AT&T

Bought 6 shares in AT&T since the last update. Recongized that their earnings per share has not developed in a best case way, yet the company is a good long run hold as long as they do not overleverage. The weighted average purchase price per share dropped a little from $31,38 to $31,22. Still looking forward to proper dividends in May. 

BCE

Bought 2 shares in BCE as the price dropped below my purchase price, the weighted average purchase price remained the same at CAD 54,82 per share. It seems like telecom companies are not hot right now and therefore the prices have been declining. Maybe the 5G investments and competition is driving this yet shall see. 

Beiersdorf AG

Increased the position by 2 shares from 3 to 5, paid price decreased from 92,84€ to 90,16€. The price seemed to decline due to lower earnings than expected yet, was proper from my personal view. The company has been making a positive result for a long time now which compared to many companies is exceptional. The dividend is a bit of a disappointment, however better than nothing. 

Pfizer 

Increased my position in Pfizer from 6shares to 12, the weighted average paid price increased from $30,69 to $32,45. In euros the weighted price paid by share dropped a bit which might confuse as the US dollar price increased. Overall I find Pfizer a solid long term investment and I am surprised that the price does not reflect their well working vaccine, compared to Johnson&Johnson which has had a rising stock price yet still not launched any vaccine even though they heavily have invested in the development. 

PPL Corp

Increased my PPL position from 6 shares to 12 and the price increased from $26,68 to $27,13, in euros I paid about the same per share as before. PPLs Q4 was apparently a disappointment for markets which saw the stock decline a bit. For me even though the company has some debt, based on cash flow it will be able to pay off most of the debt in a short period.

Telia

Bought 10 shares in Telia as the market price declined, it is the largest position in my portfolio with a 9,63% weight. For some this weight would be too big and they would increase other positions or divest some of the investment to balance it around 5%. As my investment horizon is not 3 months the size of a single position can be large from time to time and it will not bother me. Have however noted that small movements in Telias share price will have a big impact on my portfolios market value.

Waiting for March to start, a bit of dividends will come in during the first week which might give opportunities to buy some more shares. Overall, the turbulent markets are not concerning me.

The company review I mentioned in beginning of February is to come, still need to check a few annual reports and then it will be revealed. February was just really busy month for me with tax declarations, finalization of 2020 accounts and a lot of other funny financial stuff.

GameStop and the Power of Retail Investors, Did the Smart Money just admit being the looser in the Game?

 The year 2021 has been interesting from an investor perspective. We could state there is a clear battle between retail investors and so-called professional investors like hedge funds, investment banks, banks and big investors. The reason for this statement is the case of GameStop Inc. GameStop saw its stock price rocket from $17,25 at start of January to $347,51 on January 27th, a huge 2 015% increase with a high of $483,00. Partially driven by Robinhood traders, but also by other retail investors who saw a opportunity to make money in the market. Why did the large price swing cause media headline and cause trading limitations impose by Robinhood? 

First let me explain what a retail investor is, a retail investor is a non-professional investor who invests small amounts in the market using traditional brokerage firms or platforms.

GameStop shortly, a Fortune 500 company headquartered in Grapevine, Texas, games and entertainment retailer. They have physical stores where games and entertainment is old to customers. At least in 2020 the business earnings per share was negative and not anything to admire, based on the business and earnings it is understandable that many professional investors have shorted the stock. Basically the company is surviving yet does not seem to be a great business, from my perspective as I cannot identify a moat in the business other then the physical stores.

Let us look at where it all started, apparently a retail investor made a proper analysis of the company back in February 2020 and started buying the stock. He was also an active in the Reddit forum wallstreetbets. As far as I listened to the clips the way of analysis is the same learned in Universities and Busines Schools so therefore must give him credit for a job good done. The difference is his perspective differs from the short sellers. This means he sees value in the company and an opportunity while short sellers just saw a dying business as sales of physical games have decreased.

Since September 2020, the stock price rose above $7 for the first time in a long time. The big bounce happened in January as you can see in the opening text a high of $48s was a huge upswing for the company value.

 

 What happened in January and how come the stock price of GameStop exceeded $300?

The stock could rise this high partially due to a short squeeze, where the short sellers (hedge funds mainly in this case) had to cover their positions in order not to lose the whole investment or to lose all of their investors money in the whole fund. What also helps rallies is when other investors see the opportunity to make a small amount of money and start bidding up the price. This increase pressure on short seller to quickly cover their positions and are forced to pay whatever the price is on the market, pushing up the price even further.  

 

 

 To summarize this interesting case it shows that retail investors in a group can have the same affect as hedge funds or active investors when they take positions in companies. Just look at Carl Icahn, Bill Ackman and not the least when Berkshire Hathaway buys shares in companies. They all can impact market prices and have investors following their moves to achieve almost the same gain as expert investors. 

What we can learn from this is that small investors in masses have the same saying as big money. Should small investors be affraid of Governments due to this case? Not in my opinion, without the small investors a lot of companies will go belly up as no one will use their services and the big money usually pay a fraction of what small investors do. Even thought Robinhood does not charge transaction costs.