Hello Again,
During October 2019, our portfolio increased by 4.73% (see our score board) and that was after
a 3.91% increase in September 2019. The total average gain from “day one” (in our portfolio) is at
71.97%. This is a very diversified portfolio. We have, health, auto, oil, banking, country ETF,
entertainment, commodities and technology/consumer goods. Some have temporary losses but one
day when others are not performing well, these could end up being the stars of our portfolio. I asked
you to sell GE due to information on accounting fraud but now it seems like that claim is not true.
If I did not sell my personal call options, I could have made a profit of 500% by now. Then again,
If the same thing happens, I will do it all over again and the reason is that in investments, the
discipline is more important in the long run than making money in the short run. The gain that can
be seen on the scorecard is purely a comparison of purchase prices to the current prices; and that
is misleading. To take the total gain, we have to take the dividend yield as a compounded interest
rate. The dividend yield on some of our stocks are: Glaxo Smith- 4.42%, GM-3.95%, Ford- 6.75%,
Exxon- 4.77%, Chevron- 3.91%, Schlumberger- 5.54%, Valley National- 3.8%, Apple-3.08%. I am
not listing our stocks that pay less than 3% dividends (i.e Bank of America). Compare all this to the
10 year treasury paying about 2% and 80% of the developed countries having negative rates on their
sovereign bonds. Now assuming that these dividend rates were constant for the past 5 years, taking
the compounded interest rates, let us calculate how much you have gained from dividends that is
not seen on our scorecard. Solely on dividends, for the past 5 years you would have gained (magic of compounding!):
· Glaxo Smith-24.14%
· GM-21.37%
· Ford-38.62%
· Exxon-26.24%
· Chevron-21.14%
· Schlumberger-30.94%
· Valley National Bank-20.5%
· Apple-16.38%
For the past few years only a handful of stocks had significant gains. Recently most stocks in the
market are on the rise-much wider participation. This is very healthy. A couple of weeks ago, a
well known technician predicted that very soon the Dow Jones Industrial Index (DJIA) would
reach 29,000; and at that the DJIA was at 27,500. He also stated that high dividend stock would
lead the rally; and he recommended Walgreens and Dow Chemical. At that point Jim Cramer said
that he would not recommend Walgreens as CVS was better. One week later Walgreens and Dow
Chemical were much higher. This is the magic of technical analysis/chart analysis. The people
who make fundamental analysis their primary method of selecting stocks put the cart before the
horse.
Have a great month!
Fernando