Portfolio Update July 2021

 During July I increased my positions a bit as all dividends were reinvested. Bought shares in AT&T, Bayer and Alibaba while wondering if any position should be decreased or liquidated. Companies or mutual funds on reduction or liquidation list is Handelsbanken Latin Amerika, DigitalBridge Group and Ventas. Made net investments, meaning I bought more than my portfolio received in cash inflow (dividends and cash from sales). Haven't been that lazy investor lately even though mainly bought companies I already have and which market value is below purchase price. For me the laziness comes from not buying and selling all the time, instead as many times mentioned, looking for value now and not worrying to much about the future.

July was interesting as on Monday 19th global stock markets dropped around 2%. Which is a big movement, I was on the buying side that day covering the pessimistic market. Bought AT&T and Bayer AG however not at their bottom. Afterwards I was disappointed of only being able to invest a small amount. Would like to have at least ten times the money to invest every month.

My Summer holiday started in July with two weeks off, will continue with two weeks end of August. Sunshine and increasing covid-19 cases was the topic of my holiday. Have people not learned anything in the last 12 months? If they just could use a mask and take care of their hygiene, we would be in a better situation today. It did not ruin my holiday or hotel stay but has made me a bit frustrated as every day you see people neglect any form of common sense.

Holiday also started with some additions to my wardrobe, did spend a lot on clothes, almost 500€ in total on a pair of shoes, pants, shirts and jackets. Lloyd shoes and Oscar Jacobsen jackets do have a fat normal price so did what I usually do, buy at discounts and off-season. 

Also spotted that I had forgotten to update my Kone Oyj position, bough one additional share back in May for 65,75€ including transaction costs. Small change yet does impact how much I have left to reach my goals. 

The portfolio return was a bit of due to the swings in currencies, have made some adjustments that will correct for the currency swings to show a more accurate and realistic return. It also corrects the currency impact in invested capital. Return is calculated on EUR basis which is impacted by current market exchange rates as well as market prices in all portfolio currencies. 

Portfolio value at end of July was 55 492,08€ or $58 513,84, have reached my short-term goal in market value however in dividends I am still behind. A short celebration of achieving one of the short-term goals this fast (mainly driven by investments). Now just focus on the dividend part as well as the long-term goal and eventually the 1-million-euro goal (once 1 million is achieve the next step might be a 5-million-euro portfolio). 

 

Portfolio Changes

Alibaba (ticker BABA)

 Increased my position in Alibaba as the price has been lower than my weighted average. Bought 5 shares and have now 14 shares in Alibaba for an price of $216,68 per share. The 5 shares were bought at $200,99 (weighted average), ranging from $209 to $191 per share. 

Main reason for the volatility is the tension between China and USA, Chinese Governments need to show its power over tech companies and US authorities demanding Chinese companies listed on their exchange to follow rules. There is nothing wrong with Alibaba, instead it is the political risk reflected in the price. Compared to Amazon which has less political risk now while higher legal risk. For me the swings are more of a opportunity to add to my position, do not see a huge risk here. Did quickly read Alibaba's annual report and did not see any big surprises or anything that worried.

 AT&T (ticker T)

Bought 4 AT&T shares in July, increasing my position from 117 to 121 shares. Weighted paid price per share decreased a bit from $30,87 to $30,79 as the four shares were bought at a price below $29 a share.

The stock price did fall below $28 after mid-July, however only bought one share… It seemed like the stock dropped after the Q2 earnings report was released and disappointments were revealed from subscription services. Apparently, Netflix lost a lot of subscribers as well. Should be logical if people only used it during lockdown and now are partially returning to their daily life or just want to do something else.

Bayer AG (ticker BAYN)

Increased my holding in Bayer by 13% or 4 shares from 30 to 34 shares. Price paid decreased a bit from 63,69€ to 62,14€. The increase was made before the latest announcement of an additional reserve impacting the result due to legal matter in US (Monsanto acquisition and Roundup products).

Did read Bayers 2020 annual report and it was represented by acquisition failure. I am thinking about Monsanto which Bayer acquired in 2018. Both the Bayer Board and Management Group has most likely lost more of shareholders money than any other legal entity (without going bankrupt). A loss of over 10€ per share, dragging down the profitable segments of Bayer. 

It seems like Roundup has become a chronic migraine for Bayer shareholders. $63 billion is what Bayer shareholders paid for Monsanto and in addition received legal costs and settlements to come and a write down of $10,9 billion. at least $73 billion has the Bayer Management team and Board of Directors caused in cost for Bayer shareholders so far, assume the payback time is more than their combined life expectancy. Let's hope they do not repeat a similar failure in the future unless they do a similar write off their salary and bonus. Yes, I am frustrated about the whole case and would fire the whole management team and ensure the board members are never again re-elected. These kinds of mistakes are hardly treated as they should be, financial damage caused due to neglect and sloppy work usually end in unemployment. Apparently once you get to the management team your failures result in reduction of normal staff while you get a bonus for bad performance. Does sound like the incentive system and responsibilities are far from aligned...

Dividends

In July I got 128,39 euros in gross dividends and net 118,12 euros. From a dividend perspective July was an uneventful month while waiting for beginning of August when AT&T dividend will be booked. Biggest single dividend came from GlaxoSmithKline with net 50,90€ or 43 % of total dividends. Kimberly-Clark was the second biggest payer with 17,06€ or 14,44% and third came iShares Asia Pacific Dividend ETF with 16,41€ or 13,89% of total dividends. Still small amounts coming in every month.

 

 

Struggling to see the possibility of dividends reaching 2 200€ this year, Telias second dividend at the end of October will be 1 300 SEK or around 128€ gross and around 109€ net of withholding tax. That will be one of the single biggest dividends coming in. To reach the 2 200€ dividend goal this year I should invest more heavily in companies that will pay the second half of their dividend this Fall or has at least one dividend payments left. This way I could maximize dividend return, problem is that companies tend to see their price increase before the ex-dividend date meaning the return drops. Lower return means you must buy more to get a significant amount in dividends. I have a tight budget, long-term goal and might therefore do more investments based on longer perspective and not the short-term 1 additional percent gain here or there with a 30% risk (poor risk adjusted return). It does explain my increased AT&T and Bayer position.

Just to make my point, I would need to have a portfolio value of around 61 000 euro with a 3,6% net dividend return to achieve the goal of 2 200€ in net dividends. Notably Alibaba and DigitalBrigde does not pay a dividend which raises the total required invested amount. Looking forward to a cooler August month and hopefully some good discounts in the market.

First company review will be published soon. Just need to finalize a few calculations.