November 2016 Financial Overview

november financial overviewAnother month has passed, another monthly overview is here. I did not plan November to be particularly special, still so much has happened that I even don’t know where to start. So let’s don’t waste any time, let’s see whether this month has taken us closer or further away from financial independence!

What has happened in November? First of all Mrs. Roadrunner and I have joined our financial forces on the road to financial independence. Technically this has happened even earlier; we have never really been on a separate budget. Considering this, maintaining two current accounts, two investment accounts and two saving accounts didn’t really have too much sense. She also had a small investment portfolio and the two biggest holdings perfectly fit into the Dirty Thirty portfolio.

One of them is Apple, which was already a member, so it was no question to keep it or not. The other one is Diageo, which is a new addition to the portfolio. It is a solid dividend payer in an industry (alcoholic beverages) that has not been represented so far, furthermore as a British company it also adds some geographical and currency diversification to the portfolio. So ladies and gentleman, say a big hi to Diageo!

Unfortunately this also means that one member of the Dirty Thirty had to go. I simply don’t want to over diversify the portfolio with a large number of individual stocks, so I’m trying to keep that number as 30. Investing in individual stocks always requires some more attention, and for me personally thirty is more than enough to take care about. It was quite obvious for me which stock has to go, and it was K+S AG. I had multiple reasons for this choice:

  • It is quite obvious for me that they will cut the dividend after the poor performance in 2016. The year is not over yet, but fertilizer prices are still very low, Q4 can’t make any change here. I am very cautious with companies cutting dividends. Once the passive income from dividends will represent a more significant amount in our income, I would like to more or less rely that I will receive at least the same amount.
  • I already have another company in the portfolio that is involved in the fertilizer industry (CF). They were also not performing the best in the last couple of month, although recently the stock was rallying up from its lows. Furthermore CF could at least maintain its dividends.
  • I only invested a very small amount in K+S AG so far, so I could get out with a minor loss and a lesson learned.

Another important event in November was two spinoffs that have impacted my portfolio. These were the YUMC spinoff from YUM, furthermore QCP from HCP. What did I do? I sold YUMC after a few days of rally. Honestly speaking I have no clue what I should expect from the new company, plus once again, I didn’t need another individual stock in my portfolio. Nevertheless I kept QCP. The reason is simple: the total value of the shares I got is so low (less than EUR 100) that the selling commission itself would generate a huge loss in percentage. So I will just keep it on my account and forget about it.

By the way HCP: the company has announced a dividend cut. As I said earlier I don’t like to see dividend cuts in my portfolio. But is it really a cut? Well, due to the QCP spinoff we obviously can’t expect the same amount of dividend to be paid by the “new” HCP. If the total amount of the reduced HCP dividend plus the dividend of the newly received QCP shares would be the same as before, that would have no effect on my dividend income. At this point of time the amount of QCP dividend is unknown. Nevertheless I would be very surprised if the overall effect was not negative for me. So it’s more like a real dividend cut. I still give the company a chance to perform good after getting rid of QCP. The current dividend yield is still reasonable, so let’s see what will happen in the next couple of quarters. I will keep a close eye on them.

Not just a dividend cut, but also a dividend raise has been announced in November that had an impact on the Dirty Thirty. Emerson Electric (EMR) has announced its expected mini $0.005 increase which means a 1.1% raise. It is minimal, but shows that the company is dedicated both towards maintaining its dividend aristocrat status and the long term financial interest of the company itself.

There’s another new addition to my portfolio this month, which is not an individual stock but an ETF, namely Vanguard Financial ETF (VFH). In my view the sector could be a winner of the US elections plus the rising interest rates in the US. This has already started to be priced in quite fast. I don’t think that the price increase can continue with the same pace, nevertheless I am expecting a steady increase (or at least an over-performance vs the overall US stock market) on the medium term. I did not want to pick an extra individual stock from the sector, so I decided to buy it all. In addition this ETF also has a reasonable (over 2%) dividend yield and a low, 0.1% expense ratio.

The November updates are not over yet; this month I have also changed broker. The November purchases were already made through them. My old holdings are still kept with my bank as the price of transferring those assets would have been a rip-off. I will write a separate post about this and my experience with the new broker. Now let me just say that one of the benefits I had besides of the lower charges is that due to their promotion I got a maximum EUR 250 deduction from the trading fees up until the end of January. This means that I can make quite a few free trades during this period, which I am using for small additions to the existing portfolio. I would never do this otherwise as even a few EUR trading fee would represent a significant percentage cost in a one or two hundred EUR purchase. My mini purchases of November were:

  • 5 shares of KMI
  • 2 shares of LMT
  • 2 shares of NEE
  • 2 shares of YUM

I am also trying to follow the rules that I set for myself in the conclusion of “Searching for the Perfect Portfolio” series. Even though my aim is to have a roughly 90% stock, 10% bond allocation in the early years on the road to financial independence, so far I had far less bonds. Due to the low interest rates I am not looking at all the US and especially EU bonds. A low and rising interest rate environment (which is happening in the US right now) is extremely bad for bonds.

Because of this I am only interested in higher yielding, emerging market bonds right now, so I have added some extra PowerShares Emerging Markets ETF (PCY) to my portfolio. I am ready for some volatility in return of a higher (around 5%) yield, furthermore I’m planning to have it as a long holding.

Last but not least, I have started to track my investments using Google Sheets instead of standard Excel, so the monthly summary will look slightly different. Here you go:

Company Name Weight Shares Sector Price Purchase Value EUR Current Value EUR Value Change EUR
Target Corporation 7.16% 40 Consumer Defensive 77.24 € 2,469.70 € 2,915.54 € 445.84
Ameriprise Financial, Inc. 5.29% 20 Financial Services 114.21 € 1,654.00 € 2,155.52 € 501.52
Unilever N.V. 5.12% 55 Consumer Defensive 37.93 € 2,150.15 € 2,086.15 -€ 64.00
Diageo plc 5.07% 102 Consumer Defensive 20.255 € 2,450.04 € 2,066.01 -€ 384.03
Cummins Inc. 4.93% 15 Industrials 141.78 € 1,416.54 € 2,006.89 € 590.35
AT&T Inc. 4.92% 55 Communication Services 38.63 € 1,522.47 € 2,004.95 € 482.48
Apple Inc. 4.36% 17 Technology 110.6 € 1,826.80 € 1,774.28 -€ 52.52
Emerson Electric Co. 3.92% 30 Industrials 56.44 € 1,462.93 € 1,597.81 € 134.88
ABN AMRO Group NV 3.86% 77 Financial Services 20.4 € 1,441.53 € 1,570.80 € 129.27
International Business Machines Corp. 3.76% 10 Technology 162.22 € 1,331.98 € 1,530.81 € 198.83
Sanofi SA 3.74% 20 Healthcare 76.11 € 1,457.28 € 1,522.20 € 64.92
Western Digital Corp 3.69% 25 Technology 63.66 € 1,055.47 € 1,501.84 € 446.37
Valero Energy Corporation 3.57% 25 Energy 61.56 € 1,239.50 € 1,452.30 € 212.80
Archer Daniels Midland Company 3.51% 35 Consumer Defensive 43.23 € 1,269.44 € 1,427.81 € 158.37
Cisco Systems, Inc. 3.46% 50 Technology 29.85 € 1,325.61 € 1,408.42 € 82.81
Lockheed Martin Corporation 3.07% 5 Industrials 265.25 € 866.80 € 1,251.53 € 384.74
Royal Dutch Shell Plc 2.95% 50 Energy 23.98 € 1,068.51 € 1,199.00 € 130.49
Phillips 66 2.89% 15 Energy 83.08 € 1,067.69 € 1,175.99 € 108.30
CF Industries Holdings, Inc. 2.68% 40 Basic Materials 28.94 € 1,046.51 € 1,092.38 € 45.87
AES Corp 2.65% 100 Utilities 11.45 € 899.00 € 1,080.49 € 181.49
HCP, Inc. 2.40% 35 Real Estate 29.53 € 889.64 € 975.32 € 85.68
QUALCOMM, Inc. 2.37% 15 Technology 68.13 € 609.75 € 964.38 € 354.63
Kinder Morgan Inc 2.32% 45 Energy 22.2 € 561.85 € 942.72 € 380.87
Banco Santander, S.A. (ADR) 2.08% 199 Financial Services 4.52 € 1,339.29 € 848.81 -€ 490.48
Prospect Capital Corporation 1.87% 100 Financial Services 8.05 € 567.00 € 759.65 € 192.65
NextEra Energy Inc 1.85% 7 Utilities 114.23 € 727.07 € 754.56 € 27.49
Yum! Brands, Inc. 1.47% 10 Consumer Cyclical 63.39 € 505.53 € 598.19 € 92.66
Exxon Mobil Corporation 1.42% 7 Energy 87.3 € 511.84 € 576.67 € 64.83
Vanguard Financials ETF 1.33% 10 Financial Services 57.24 € 505.88 € 540.15 € 34.28
Colgate-Palmolive Company 1.21% 8 Consumer Defensive 65.23 € 504.24 € 492.44 -€ 11.80
Visa Inc 1.08% 6 Financial Services 77.32 € 445.44 € 437.78 -€ 7.66
Total € 40,711.41 € 4,429.27

This means EUR 4,429 gain in total, comparing to the EUR 2,094 in October. Besides of the fact that some of my stocks are doing really good in the recent “Trump rally” (especially TGT and AMP; those were really great additions in September and October), the strong dollar is also in my favor as I’m tracking the performance of my portfolio in EUR.

My stock portfolio allocation by sectors looks like the following:

portfolio sector allocation

As you can see, the portfolio is relatively heavy in consumer defensive, technology and financial services stocks, while basic materials, consumer cyclical and healthcare is under represented. I have never planned it like this, but such overviews are useful for me too when thinking about future purchases. I would like to keep a relative balance here.

Besides of the above, I also have 75 shares of PowerShares Emerging Markets ETF (PCY) in my bond portfolio, and the real estate (garage) value of EUR 13,000 and the EUR 10,000 cash remained unchanged.

how to build an investment portfolio

As you can see, comparing to the overall portfolio I’m still sitting on too much cash. Nevertheless this will continuously decrease in percentage as new purchases are added. I would always like to have a EUR 10,000 emergency fund; this amount will not be increased in the future.

Finally, let’s see where we are on the road to one million (or more like on the road to our first milestone off 100k):

how to be a millionaire

There’s still quite a few months to go, but we’re slowly getting there. It has been less than a year since this journey has begun, but we’re already close to 3/4 to our first milestone. The icing on the cake is that there were no negative months so far. This is more or less expected at the beginning as the new purchases still represent a relatively big percent of the overall portfolio. I have no illusion about there will be some negative months ahead, even some significant negative periods. The point is we still keep on walking, no matter what!

Dear readers, how was your November? What purchases you made and what’s your plan going forward? I would be interested to hear!


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Disclaimer: This post or any other information on the site is not intended to be and does not constitute financial advice or any other advice. I am solely sharing my idea, plan and progress on early retirement.

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