Updated: Aug 15, 2022
The global stock markets were in a slow downtrend for the first half of this year, with the NASDAQ down over 20%. In July, markets staged quite a reversal of fortune and were up across the board. The NASDAQ was up 12%. My portfolio has tracked broadly in line with the indexes. During the first half of the year I was probably like most people in the markets i.e. I tried not to look at it. But in the last month I have been pleasantly surprised, and have followed the movements of my stocks more.
I like to go by the Axim that the best formula for long-term success is not to try and time the markets, but to spend time in the markets. How I do this is to hold on (and occasionally trade) a broad basket of ETFs and individual stocks. The index ETFs I have are intended to ensure my portfolio gains at a comparable rate to the generally good long-term returns of the market. My individual stocks are intended to do two things; to provide me with dividend income, and/or to outperform the market. Over the past year, this is what they have done.
A smart purchase I made in December last year was Lockheed Martin (LMT), which has obviously benefited from the war in Ukraine. Its F-16 fighter jets have been instrumental in helping the Ukrainians fight the Russians. It is odd that the American government hasn't ordered more to be built, because the world is clearly a much more dangerous place now, but that is a topic for another day. LMT have outperformed the market this year (up 26% versus down 9%) and provide me with a good dividend (2.6%). So they have operated as the perfect kind of stock for my portfolio.
I was very lucky that Z Energy (formally ZEL) got privately brought out by an Australian company earlier this year. As the markets were going south, I knew that ZEL would be unaffected, and I just had to wait for the money to land in my bank account. When it did, I topped it up with some of my income (actually all of my disposable income!), and this past week, I finally found a stock to buy. Fletcher Building (FBU) have been around for over 100 years, and hold a dominant position in the building materials market in NZ and Australia. Notably, their subsidiary company, Winstone Wallboards have a 96% share of the NZ Plasterboard market. FBU have shown rising financials in the past few quarters, and look well placed to deliver good earnings next week. Just this morning, I have entered into their Dividend Reinvestment Plan (DRP). I believe with rising earnings and a PE Ratio of 12.7, they are reasonably valued. And the dividend yield of 5.5% is nothing to be sniffed at. FBU will provide a similar position in my portfolio to what LMT has provided, i.e. give a good dividend and (hopefully) outperform the market.
I have actually made more moves in the market this year than the aforementioned purchases. I brought Enterprise Products Partners (EPD) earlier in the year to get an exposure to the oil and natural gas markets. They are a low risk way of gaining exposure, due to them being a mid-market player. They don't produce natural gas or oil, and don't sell it. They transport and store oil and gas. They get their revenue through long-dated contracts with companies like Exxon Mobil and Halliburton. I will (hopefully) sell my small Verizon holding for break-even shortly, and will buy more EPD. They aren't as exposed to commodity price fluctuations as the producers, and are diversified across crude oil, refined products, and LNG (Liquified Natural Gas). Important to note, is that when receiving dividends from EPD, like all Master Limited Partnerships (MLPs), you do not pay any withholding tax, typically 15%. So when you see the trailing yield quoted, 7% with EPD currently, that is what you receive quarterly. Other MLPs that I may buy with the Verizon money are MPLX or Icahn Enterprises. In the case of Icahn Enterprises, the 14.5% yield is the highest amongst all MLPs. Other companies to look at when looking for a high (likely sustainable) yields are the shipping stocks, such as Star Bulk Carriers (24.7% currently), although you will pay the 15% withholding tax.
This article would be needlessly long if I was to discuss all my thoughts about various stocks, so I will just leave it here. Bye for now.