Cemanuel 2022 Portfolio Thread

[cemanuel]

(07-07-2022, 07:56 AM)fenders53 Wrote:

(07-07-2022, 07:00 AM)cemanuel Wrote:

(07-07-2022, 06:34 AM)fenders53 Wrote: What's your other idea?  Sorry but not a chance I would advise selling either down here.  I own GOOGL and intend to own AAPL again if it dips much lower.

What do you mean other idea - not do conversions? Let the roofs on buildings fall in?

Edit: Maybe I should have repeated the purpose of this account:

Taxable Account: Provide me with sustainable, growing, dividend income. I will use this account to completely fund my retirement. Based on my pre-retirement budgeting I should be able to cover about 80% of my expenses from dividend income. The other 20% will come from a combination of saved cash and periodic sales; at this time those sales will be AAPL and GOOGL shares. I won't be completely passive here but other than these sales expect to do little trading here. I'm reasonably happy with what I own though I'm sure that as I pursue my quest to become the longest-lived Human Being in the history of the planet    that some companies will run into problems. Total return/value is not a primary goal of this account but it's always nice to have.

You asked for opinions and I gave you mine.    What would you do if you didn't own AAPL or GOOGL?  Do that instead lol.  You will rationalize whatever you do in the end.  That is what we humans do.  Maybe AAPL or GOOGL will get smacked in a few months and it will look brilliant for awhile.  Those are just two of the toughest stocks in the market to make a two year bet against.  The reason you purchased them is still valid.

The reason I initially purchased them was to maximize capital gains. That is no longer the purpose of that account - I changed that objective a couple of years after getting started. So no, the reason I purchased them is no longer valid.

The reason I didn't sell them when I was converting to DGI IS valid. That reason is so they could provide me with cash, through periodic sales, to cover my dividend income shortfall once I retired.

I own them in my IRAs. Those are TR accounts so those companies suit the account objectives.

[Kerim]

Hmm. Those two would be among the last I'd sell -- great and dominant companies raking in boatloads of cash. Definitely long-term holds for me.

But.... if you have to sell *something* to raise some short-term cash, and if you've decided it is going to be either your AAPL or your GOOG, I guess I'd be inclined to keep the GOOG and sell the AAPL. A "Sophie's choice" for sure! And this is completely by the seat of my pants, but GOOG is likely to thrive no matter what happens in tech over the years. Wherever the people's eyeballs are, GOOG will be there serving ads. Though I would NOT bet against AAPL, it isn't quite as clear to me how safe they are as the tech landscape evolves over the years.

[fenders53]

(07-07-2022, 09:02 AM)cemanuel Wrote:

(07-07-2022, 07:56 AM)fenders53 Wrote:

(07-07-2022, 07:00 AM)cemanuel Wrote:

(07-07-2022, 06:34 AM)fenders53 Wrote: What's your other idea?  Sorry but not a chance I would advise selling either down here.  I own GOOGL and intend to own AAPL again if it dips much lower.

What do you mean other idea - not do conversions? Let the roofs on buildings fall in?

Edit: Maybe I should have repeated the purpose of this account:

Taxable Account: Provide me with sustainable, growing, dividend income. I will use this account to completely fund my retirement. Based on my pre-retirement budgeting I should be able to cover about 80% of my expenses from dividend income. The other 20% will come from a combination of saved cash and periodic sales; at this time those sales will be AAPL and GOOGL shares. I won't be completely passive here but other than these sales expect to do little trading here. I'm reasonably happy with what I own though I'm sure that as I pursue my quest to become the longest-lived Human Being in the history of the planet    that some companies will run into problems. Total return/value is not a primary goal of this account but it's always nice to have.

You asked for opinions and I gave you mine.    What would you do if you didn't own AAPL or GOOGL?  Do that instead lol.  You will rationalize whatever you do in the end.  That is what we humans do.  Maybe AAPL or GOOGL will get smacked in a few months and it will look brilliant for awhile.  Those are just two of the toughest stocks in the market to make a two year bet against.  The reason you purchased them is still valid.

The reason I initially purchased them was to maximize capital gains. That is no longer the purpose of that account - I changed that objective a couple of years after getting started. So no, the reason I purchased them is no longer valid.

The reason I didn't sell them when I was converting to DGI IS valid. That reason is so they could provide me with cash, through periodic sales, to cover my dividend income shortfall once I retired.

I own them in my IRAs. Those are TR accounts so those companies suit the account objectives.

You made your decision before you even asked. We can chat about it the next two Julys. If the new roofs are truly a this year emergency and you can't afford to do it out of the checking account, then that is kind of the definition of an emergency because you don't have current cashflow available. I would pay for at least some of it out of emergency fund. Let's be honest, you could replenish the emergency fund in a day if you actually had to. I am happy you can. If you insist on selling one, sell GOOGL into the probable pre-split run that will likely pull back some if the market doesn't get happy soon which few expect. I bet you were planning to sell AAPL instead worried about earnings which may be a valid concern. I could be wrong, just causing trouble.

[cemanuel]

(07-07-2022, 01:11 PM)fenders53 Wrote:

(07-07-2022, 09:02 AM)cemanuel Wrote:

(07-07-2022, 07:56 AM)fenders53 Wrote:

(07-07-2022, 07:00 AM)cemanuel Wrote:

(07-07-2022, 06:34 AM)fenders53 Wrote: What's your other idea?  Sorry but not a chance I would advise selling either down here.  I own GOOGL and intend to own AAPL again if it dips much lower.

What do you mean other idea - not do conversions? Let the roofs on buildings fall in?

Edit: Maybe I should have repeated the purpose of this account:

Taxable Account: Provide me with sustainable, growing, dividend income. I will use this account to completely fund my retirement. Based on my pre-retirement budgeting I should be able to cover about 80% of my expenses from dividend income. The other 20% will come from a combination of saved cash and periodic sales; at this time those sales will be AAPL and GOOGL shares. I won't be completely passive here but other than these sales expect to do little trading here. I'm reasonably happy with what I own though I'm sure that as I pursue my quest to become the longest-lived Human Being in the history of the planet    that some companies will run into problems. Total return/value is not a primary goal of this account but it's always nice to have.

You asked for opinions and I gave you mine.    What would you do if you didn't own AAPL or GOOGL?  Do that instead lol.  You will rationalize whatever you do in the end.  That is what we humans do.  Maybe AAPL or GOOGL will get smacked in a few months and it will look brilliant for awhile.  Those are just two of the toughest stocks in the market to make a two year bet against.  The reason you purchased them is still valid.

The reason I initially purchased them was to maximize capital gains. That is no longer the purpose of that account - I changed that objective a couple of years after getting started. So no, the reason I purchased them is no longer valid.

The reason I didn't sell them when I was converting to DGI IS valid. That reason is so they could provide me with cash, through periodic sales, to cover my dividend income shortfall once I retired.

I own them in my IRAs. Those are TR accounts so those companies suit the account objectives.

You made your decision before you even asked. We can chat about it the next two Julys.  If the new roofs are truly a this year emergency and you can't afford to do it out of the checking account, then that is kind of the definition of an emergency because you don't have current cashflow available. I would pay for at least some of it out of emergency fund.  Let's be honest, you could replenish the emergency fund in a day if you actually had to.  I am happy you can. If you insist on selling one, sell GOOGL into the probable pre-split run that will likely pull back some if the market doesn't get happy soon which few expect.  I bet you were planning to sell AAPL instead worried about earnings which may be a valid concern.  I could be wrong, just causing trouble.

Whether to sell AAPL or GOOGL?

No, I did not. I have a direction I'm leaning but that decision won't be made until I press the "sell" button. Folks could have information I'm not aware of that may influence which stock I trim first.

Re the EF, it actually is larger than it probably needs to be though I was going to wait until 62 before I cut it down as I would then have taking SS as an extreme backup. But normal maintenance isn't something I want to look at as an emergency. Same for something like buying a new car. The plan was always to use trims of those two companies for expenses such as that.

This may be a case where a principle is getting in the way of financial profitability. I am leaning toward AAPL, more a question of future price gains & current valuation at this point in time. I think GOOGL has more run in it though this is tentative until I actually sell.

[fenders53]

I think AAPL is the better sell here, but if ad rates are down GOOGL will get hit too even though they are already cheap enough in my opinion. It;s never cheap enough if th market has to wait for good news. AAPL is not cheap enough for me to buy yet. I m going to be shocked if they don't have at least one flat quarter coming soon. All it is going to take is a couple major earnings misses and the market is going to get spooked again. You can feel it coming. If you are going to sell my crystal ball says to get at least some of it down very soon.

[cemanuel]

Sold 65 shares of AAPL at $155.40 this morning. I actually have enough dividend income to see me through August unless a surprise comes along. But Apple's had a nice run recently and volumes Wed. & Thurs. were down so that might be ending. With an ER next week it seemed like midway between recent highs and lows was a solid time to sell.

I think it's trading a bit higher relative to GOOGL plus I have more than twice as much. This took AAPL down to 12.17% of my Taxable Account. This may be the only stock sale I make for living expenses this year but a big IRA conversion will mean a big tax bill so I can't guarantee it.

[fenders53]

(07-22-2022, 04:47 PM)cemanuel Wrote: Sold 65 shares of AAPL at $155.40 this morning. I actually have enough dividend income to see me through August unless a surprise comes along. But Apple's had a nice run recently and volumes Wed. & Thurs. were down so that might be ending. With an ER next week it seemed like midway between recent highs and lows was a solid time to sell.

I think it's trading a bit higher relative to GOOGL plus I have more than twice as much. This took AAPL down to 12.17% of my Taxable Account. This may be the only stock sale I make for living expenses this year but a big IRA conversion will mean a big tax bill so I can't guarantee it.

Seems like a logical trade.  As I mentioned before I like the timing.  I could sure be wrong but it is hard to imagine all the FAANGs making it through earnings without one or more spooking the market.

[cemanuel]

There are two parts to this rather long comment. The first concerns my taxable account, the second is mostly non-DGI though it does impact my income investments.

I had a busy first 10 minutes of the market week, at least for me.

On June 30 I bought 155 shares of BBY at $65. This was purely a tax loss purchase. It took me overweight in it but I have some shares I bought this spring for as high as $99 - I had a $100 price on it then. I intended to sell an equivalent dollar amount once the wash period was up.

So this morning I sold 130 shares at $76.53.

Now this particular transaction worked out and I'm happy with it. But I'm reminded of Churchill after Dunkirk (paraphrasing), "A retreat is not a victory."

Well, losing money is not making money. When I bought BBY at $99 I thought the price would move up. It did not. It's nice that the US Tax Code offers the chance to get a consolation prize. It's even nicer that on a trade-for-trade deal I sold for about 17% higher than $65. Or to look at it another way, for the same money I picked up 25 more shares of a dividend-paying company I like.

But it isn't a win.

So I had roughly $10k to work with. One option was to repeat the tax loss game. My problem is that I have limited losses left to work with and with the market moving up again I'm less confident that it will work out. I decided not to press my luck and just make buys of long-term holds to generate income.

My buys were 40 shares of MO at $44.01 and 65 shares of TROW at $121.17.

Deciding to pick a little MO up was easy. I was about $1,800 short of a full position, it's trading at an attractive level, we all know about the yield and despite the continued predictions of its demise it keeps churning out cash. Tobacco's been called dead since 1965. The day may come where the "they're right eventually" saying will be proven true but I'm not seeing it. The only negative is it's my largest dividend payer, well over 10% of my Taxable Account income and this didn't help with that.

TROW was tougher. I ended up looking at three companies besides it, two of which I own. These, and the reason I didn't buy, are as follows:

1) VZ. If you'd asked me to make a snap call Friday when I decided to do this I'd have said I'd probably go the "income now" route and pick it up. Then I looked at the latest ER over the weekend. There's nothing there I liked. Cash flows and income down, debt up, no growth prospects for an extended period. I don't think the dividend is in any immediate danger but I have about a half position. Based on the latest financials I decided that was quite enough, thank you.

2) AVA, TROW or WHR. These all fit in the roughly 4% yield category.

a) AVA is the one I do not own though it's been on my watch list a while. I went through some ARs, read up on the company and I like it. It has a focus on renewables and carbon reduction which I think is important for utes these days. The financials look good. But the mid-single digit DGR turned me off when compared with the other two AND the share price has done nothing for several years. Now price isn't a primary concern of mine but it's still nice to have. So I set it aside.

b) WHR is a good company but for a long time its dividend has had mid-single digit growth. The monster 25% hike it just gave catapulted the 5-yr DGR into double-digits. That was great and I was happy to have it but to me it still looks like a company that will have mid-single digit revenue growth going forward. I expect the dividend to follow suit.

c) TROW's latest financials don't look good but to me they are the kind of un-good looking that should be expected for an investment company during a declining market. Of course AUM is down along with revenues, cash flows, etc. But this is nothing like 2007-09 and it managed to increase dividends then. I don't see anything to really worry about or a reason to think strong dividend growth won't continue (long-term, harder to say for a year or two).
So that's what I did. I momentarily wished that Canada has the same tax treaty with us as the UK does so I could buy one of their banks but they don't so it didn't take up much of my mental time.

This whole thing started when I sold AOS - then yielding about 2% - in June so I grew my dividend income significantly and increased my DGR. I could probably calculate it but in essence I gained 25 shares of BBY, 40 of MO and 65 of TROW in exchange for 200 shares of AOS. I also knocked about $3k off my 2022 income.

So when I look at the whole thing from June on it's a win but I did sell 130 shares of BBY at nearly a 25% loss.

Non-DGI (mostly)

I've pretty much decided to do annual IRA conversions to the 24% tax bracket limit, $170,050, each year. Now I do not know why the market is trading where it is or why it has recovered like it has over the past month. But at one time I was planning to convert around $70k at S&P 3500 - I really thought the bear market floor would be in the 3200-3400 range.

I gave up on this idea after the market's response last week to the Fed and the GDP report. Obviously it could still happen in which case I'll be kicking myself for not sticking to my plan but after last week I'm just not seeing it.

So this morning I did a conversion with 190 shares of NVDA and 390 shares of AMD along with cash that had come in from dividends. Choosing those two was simply asking myself the question, "What companies might make a large recovery in the fairly near - next 6 months - future?" I had plenty of choices but those are the two I went with. I was down about 17% on AMD and 24% on NVDA since buying them in Feb-March.

The DGI "tickle" is this means I'll need to generate the cash to pay the taxes by September so I'll need to sell something from my Taxable Account. Unless something crazy happens I expect this to be AAPL. Later this week I'll run through the calculations to see what I'll owe. Then it'll be a matter of coming up with a sale price. I could sell GOOGL but right now I think it is significantly undervalued with more potential run - not that Apple won't run too. Plus I have much more of it.

I should be sitting at about $140k income from the IRS perspective (including my expected dividends for the rest of the year). I expect to make a smaller conversion in December to get closer to $170k.

So that's today. Now I need to decide what to buy with the about $1200 cash I have in the Roth but I'll give myself a bit to mull that over and maybe wait until tomorrow.

[fenders53]

A quick comment about VZ. The entire sector is struggling. CAPEX requirements are crazy high. Have you seen what they pay via auction for the 5G rights from the GOV. T is starting to see slow payments from subscribers. If nothing changes debt is going to eat all of them up eventually. Dividends are secure for now but it's going to get harder IMO.

[cemanuel]

(08-02-2022, 08:28 AM)fenders53 Wrote: A quick comment about VZ.  The entire sector is struggling.  CAPEX requirements are crazy high.  Have you seen what they pay via auction for the 5G rights from the GOV.  T is starting to see slow payments from subscribers.  If nothing changes debt is going to eat all of them up eventually. Dividends are secure for now but it's going to get harder IMO.

VZ and T aren't going to say it outright but they know there isn't growth in their core businesses. That's why they've been trying so hard to branch into other areas. They just haven't been any good at it so far.

[fenders53]

(08-02-2022, 02:37 PM)cemanuel Wrote:

(08-02-2022, 08:28 AM)fenders53 Wrote: A quick comment about VZ.  The entire sector is struggling.  CAPEX requirements are crazy high.  Have you seen what they pay via auction for the 5G rights from the GOV.  T is starting to see slow payments from subscribers.  If nothing changes debt is going to eat all of them up eventually. Dividends are secure for now but it's going to get harder IMO.

VZ and T aren't going to say it outright but they know there isn't growth in their core businesses. That's why they've been trying so hard to branch into other areas. They just haven't been any good at it so far.

They and T-Mobile need to stop out bidding each other for GOV rights.  It's like sports league broadcasting deals.  Keep running the price up and eventually you can't charge enough to make it work.  If T hadn't made huge bad bets they would be in better shape now.  In retrospect so smaller bets in growthy sectors would have had a better risk reward.   It's hard to digest a $50B error and try to pay  market leading Divs.

[cemanuel]

July Portfolio Update.

This one will be relatively brief. I felt like there was a lot going on this month but it was actually in my mind - the big moves came on August 1. I did make one withdrawal of accumulated dividends for expenses and one stock sale.

The big news for July is another in a series of record high dividends, including in the taxable account - once you discount the big LYB special in June. I may be writing this qualifier for years. 

A Success Story, Maybe

I believe in celebrating success stories. This one is more of a if/then/success story - shout out to programmers.

Before running my tax numbers in April, 2021 my retirement funding plan was this:

• Primary Source: 80% from dividends received in my Taxable Account
  
• Supplemental Source: 20% from dividends received in my IRA once I did the rollover from my retirement account.
  

Running tax numbers changed that. The supplemental source is now sales of AAPL and GOOGL stock from my Taxable Account. The 15% LT cap gains rate resulted in a significantly lower tax bill than taking it from my IRA and having that taxed as income.

However IF I had kept to my original plan, July would have been the first month where my combined Taxable Account and IRA dividends would have been enough to meet my budgeted expenses. Is this real? Debatable but I am taking it as evidence that what I was doing leading into retirement was sound. So I'm still calling it a success story. Sort of.

Here are the July numbers:

Metric                         IRAs                            Taxable                                   Total

Buys                              0                                  0                                           0

Sells                              0                                   1                                           1

Dividend Increase 
over July, 2021           421.90%                          29.85%                                 65.65%

Dividend Increase 
over April, 2022             8.22%                           11.05%                                 10.43%

Change in value 
over 6/30/22                12.09%                            6.16%                                   9.18%

Current Dividend Yield     1.57%                            2.93%                                   2.21%

Change in 12-mo 
projected Dividend 
Income fr 6/30/22            .03%                             0.00%                                    .01%

Organic/Internal 
annual DGR                   14.47%                            10.41%                                    N/A

Some items of note include the huge YoY dividend increase - I'm sure I bought some stocks that paid during the 1/4/7/10 cycle compared with the year before. However the substantial increase over April reflects the large dividend increases I've been receiving all year. This has been a very nice DGI year to date. 

The YoY IRA dividend increase is meaningless - all I had was a Roth in 2021. The increase over April does mean something as I completed the rollover by mid-February.

The increase in value in the Taxable Account was impacted by withdrawing some dividends but this was fairly small - I still would have significantly trailed the market - read it was up about 9%.

As I made no buys and only had one small dividend increase paid, my forward 12-month dividend income projection remained unchanged, basically. The small MU dividend hike was offset by selling $10k worth of AAPL to pay for roofs on my barns. Though in case you are worried, my projected dividend income was actually up in my Taxable Account - by 69 cents. Seeing that once I calculated it was pretty funny.

• Stock sale from my Taxable Account: 7/22/22 – AAPL, $155.40
  
• Dividend Increase Paid: MU - $.10 to $.115/share
  

The organic DGR continues to be very high. This may continue for my IRA. I do not expect it to for my Taxable Account - at some point I look for 8-9%. Massive hikes from BBY and WHR and recent good ones from many others have contributed to this.

So record high dividend income and account values approaching positive YTD (considering withdrawals, passed into the green in early August). It was a very good month.

August 1 had more account activity than the entire month of July but that will have to wait.