My Investing Journey with Passive Income, Stocks, and Cryptocurrencies!

Category: Materials Sector Page 1 of 4

INSANE Returns

All I can say is the returns lately have been absolutely INSANE.

I want to highlight some picks over the last six months here:

1)CHEWY-Chewy just had a fantastic report and is seeing numerous upgrades and higher price targets. I think we go even higher from here. Every time I drive around I see Chewy Boxes at people’s houses to be recycled. Most importantly, they have great customer service and people love this company (and their pets). I have literally been buying more shares every month. I’ll be holding this one a long time! Currently up 46%

2)HOOKER FURNITURE COMPANY-Out of nowhere this has been my turnaround kid. The last six months has just been INSANE with this company. I went from being down in this stock in 2019 to now I am up almost 30%, some tranches up over 120%. This past earnings report was incredible and they just raised the dividend by 12%. I will be holding this smaller cap stock a very long-time as well. Their social media presence really shows the strength of this company with it’s customers.

3)VIRGIN GALACTIC-This is by far one of my riskiest investments. At the same time, the returns have been incredible. I am now up 57%, with some tranches up 85%. At the moment, the company isn’t bringing in any revenues but I think this one could go to outer space sure enough.

4)KAISER ALUMINUM-If you’ve watched this blog, you know I’ve been in and out of this stock many times over the last two years. After the March Crash I saw an opportunity, the stock was at a NINE YEAR LOW. So I dug in and I kept adding. Well, they made an acquisition of a can company; this resulted in the stock going up 10% in one day and another 12% the next. I am now up over 40% in KALU. I knew it would be some nice gains but I thought it would be years before I saw this. I’ll take it!

5)CITIZENS FINANCIAL GROUP-I’ve never bought a bank stock before, I’ve been leery of them for years. However, I kept running numbers/figures on CFG and just firmly believed it was undervalued, trading under Tangible Book value. Turns out I was right and now I’m up over 26% in this one as well, not counting those dividends. What a dividend! It was yielding over 5.5% in some of my tranches. I believe the banking sector is going to be fine with these low interest rates. CFG reported a 1% reduction in interest rate income but non-interest rate income was up over 30%. These banks are going to find plenty of ways to make money.

In summary, this is the strongest my portfolio has ever performed. My Brokerage account which has under performed for awhile is now the HUGE outperformer. On a 3 month basis my brokerage is beating the market by 12%, on a 1 month basis it is beating it by 4.20%. My IRA has slid a bit (underperforming the market by about .5%). However, YTD it is ahead by just a small bit.

I’m anxious to see how I do in 2021. So far 2020 has been a huge success. I firmly believe this is because in my IRA I pulled out before the March Crash and then I went back in buying hand over fist things like Stanley Black & Decker at rock bottom prices. My brokerage account performance was greatly enhanced by my sell of Eaton Vance (Up 53%) and it was my 4th largest holding.

Looking forward to the rest of the year and 2021!!!!!

What am I buying?

1)Universal Forest Products is a new position I started, it is a small-cap company in the lumber, backyard equipment, gardening supplies area. They also supply materials for Construction as well

2)Chewy– I’m still taking Nibbles at CHEWY :)….a few shares here and there. My wife and I use Chewy for our two cats (Sid and Ellie) and we love the service. At this point, I consider this a speculative bet though.

3)Mcgrath Rentcorp-I was FINALLY able to buy shares of this company at a reasonable price. The books look great and it is well managed. Another small-cap stock.

4)Still buying Stanley Black & Decker

5)Schneider Trucking and Marten Transports-You MAY be thinking, didn’t this guy just sell SNDR? I did, but I kept a small portion of my shares and at these prices, I think TRUCKING STOCKS present an incredible bargain. They were already priced for a recession and have held up pretty well during the Corona Crash.

6)Taking small nibbles at ITOT and QQQ every few days. I know we can’t time the bottom so I am just buying around 2400 and under mark on the S&P 500. These are great index ETF’s that I want to hold until retirement.

7)Hooker Furniture Company-another small-cap I’ve been holding almost two years. This presents me with a great opportunity to lower my cost basis considerably. I am down around 40% in this stock, luckily it’s not a huge position but I believe in the company long-term, if it can get past the Tariff stuff (and now the virus!)

8)Lowe’s-I had recently bought Home Depot to swing trade and here I am with Lowe’s this time for another swing trade. I am up 3.5% after one day so far, I play on getting out around 5-6% unless it just blasts up and then I will, of course, hold longer.

Will Dividend Investing Protect you more?

I will preface this article by stating I do a good bit of “Dividend Investing.” At the same time, it is not all I do.

One common argument by dividend investors is that by focusing on Dividends, you are more protected during a market correction, recession or bear market.

How has that technique faired in this Coronavirus Correction? Let’s take a look at some major ETF’s.

ITOT (Total Stock Market ETF containing 3633 holdings): It pays a distribution of 2.05% and is currently down 22.11% YTD.

NOBL (A Basket of 65 S&P Dividend Aristocrats): It pays a distribution of 2.13% and is currently down 24.54% YTD

DGRO (A basket of 477 Dividend Growers): It pays a distribution of 2.48% and is currently down 22.76% YTD.

If we do some quick math here and add back in the dividends we get a total return of the following, all numbers NEGATIVE (Yes, I realize that doesn’t take into account some factors over the next year but we have to work with knowable here)

ITOT 20.06%, NOBL 22.41%, DGRO 20.28%.

If you look at those numbers; NOBL is the worst performer, even taking into account the dividend. ITOT and DGRO are very close; DGRO paying a greater dividend.

ITOT holds the largest number of companies, followed by DGRO, followed by NOBL. I believe the greater diversification is part of the protection equation.


SECTOR exposure plays a big part here:

ITOT is 8.45% tech, 5.33% IT services

NOBL is 9.41% chemicals, 7.86% Household products

DGRO is 12.06% banks, 9.13% Pharmaceuticals

The lack of TECH exposure within NOBL is part of the reason it doesn’t perform as well poorer. DGRO has 4% Software and 3% Tech storage/hardware exposure and notice the better performance.

It turns out over the last 4 weeks, DGRO has fared slightly better than ITOT; NOBL is still behind. It remains to be seen how each will do over the next month or so.


Some other considerations when focusing on dividends:

LOTS of Dividends have been slashed during this Coronvirus Crash:

Here are just a few:

  • Macy’s
  • Occidental Petroleum
  • Ford
  • Darden Restaurants
  • Nordstrom
  • L Brands
  • GAP
  • Texas Roadhouse
  • FCX
  • Cracker Barrell
  • Delta
  • Boeing
  • Marriot
  • AMC

There are many on that list that NO ONE would have predicted would have to cut their dividend. For example, if you just looked at Delta’s payout ratio, you wouldn’t have thought it was at risk? Some of those companies have been paying dividends for DECADES.

Please keep this in mind: The risk of a DIVIDEND stock is compounded by the possibility of its dividend being cut/reduced. When the dividend is cut, it sells-off, causing the price to crash further. You not only lose the dividend but you lose the total return as well.

Furthermore, something that MANY Dividend Investors don’t realize. When that dividend is cut, a dividend-focused ETF has to remove it from it’s holding. Thus, there is more selling of the stock. Yet, another reason that even a dividend-focused ETF could present more risks. At the moment, I don’t know if any Dividend Aristocrats have had their dividends slashed or not.

I think before this is over, the Corona crash will prove that Dividend Investing is NOT innately safer. It has risks just like everything else. I say this as someone who has already had TWO dividend cuts (Darden Restaurants and Ryman Hospitality Properties). There is NOTHING wrong with Dividend Investing; however, I don’t think to focus solely on it or even heavily making that your deciding factor when investing is a smart idea, even during bear markets.

JANUARY DIVIDEND REPORT

Okay, it’s that time again. My January Dividend Report along with some notes on Dividends:

Brokerage Account

AEO $22.96

PMM (Putnam Municipal CEF) $7.36

SNDR $3.30

Macy’s $4.53

Eastman Chemicals $33

Quest Diagnostics $4.08

Leggett and Platt $14

Total = $89.23. If we look at three months back ago (same companies last report) we see a total of $84.31. This is an increase of about 5.84%


In my IRA:

RHP $28.80

MWP $23.14

XHP $1.65

Total = $53.59. This compares to these companies last report of $46.54. An increase of 15.15%. This makes sense too because I have bought more MPW and I believe RHP as well. Please notice that these are ALL REITS, all paying over 4%. I normally don’t go for high yielders but these REITS are good for supercharging my IRA with extra “contributions.”

As you can see, my IRA dividends are growing just a bit faster than my brokerage account at the moment. I haven’t made a whole bunch of new dollar investments into my brokerage account in about a month so percent increase has slowed a bit.

Overall I am happy with my dividend return here but also please note I did sell some of my Leggett & Platt, a little SNDR and even sold a small portion of my AEO at a small loss. So this, of course, will hurt some of my dividend returns.

Why did I do this?

I took some LEGG off the table because it had run up almost 40%, that is me playing it safe and locking in some profits. My plan is to buy back again around the $46 mark, which I do believe we will see again shortly. The stock is currently overvalued.

AEO I just had to get out of a bit, I was tired of watching it go down and feel like I could take the money and make my losses back quickly with a better opportunity.

There is a good chance I will be selling all of my SNDR and DGX positions very soon. SNDR has not been a great performer and is in an earnings recessions. DGX seems to be going sideways again and I think the future is a bit bleak unless we see great earnings. I won’t be holding SNDR through earnings, DGX I will.

Here is the graph of dividends over time:

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