Initiated a position in Goldman Sachs

 

 

gs logo

I recently initiated a position in Goldman Sachs for several reasons. I believe the recent Malaysian scandal created a lot of fear about the possible financial repercussions of this 1 billion dollar fraud. In any cases this issue could drag for years in courtrooms and will probably be resolved off court by mutual agreement.

The company still execute in key metrics. They buy back their shares over time / EPS wen down this year because of specific provision tax and it will resume upward fairly shortly.

EPS GS

 

Also their trading division is making a lot of money see below graph. impressive stats!!

trading revenues

Valuation is really to cheap to ignore. If Warren Buffett adds to his position @ 236$/ share I am Happy to buy Goldman Sachs @ 198$/share!!

 

The company is also looking to grow in daily banking with for example a recent partnership with apple for Credit card, that will be announced soon. The key thought here is that Goldman Sachs will still do well in any given economy or markets.

 

The dividends are also headed in the right direction for long term income lovers ūüôā

 

dividend gs

 

 

 

My STRIKE PRICE FOR MMM, MCO, ITW

I have recently raised cash on my accounts and would like to eventually deploy that into 3 main targets.

 

target

  1. MMM : I would love to buy some shares at a price of 185-190$ a share.
  2. MCO: Anything around 150$/ share would be great
  3. ITW: Interested at 130-135$ range.

Initiated a small position in UTX

Following my previous article on United Technologies, the company has been on my radar for a while because I liked the history of this company in both expertise good stewardship from management and the future spin off in 2020, that should create further value for share holders.

UTX is now a new tier 2 holding ( around 2% of my portfolio)

utx logo

 

you can find all needed information about the company under the link beloW

 

United technologies info

 

Spring cleaning on my portfolio was due

When I decide to acquire shares in a company I am interested in I usually try to hold them for as long as possible because I am satisfied with the risk reward at the time of purchase. However sometimes the market gives you opportunities that changes the landscape of your investment thesis and you have to be ready to change or reshuffle your portfolio. That doesn’t mean you have to liquidate half of your portfolio and buy other companies, it means nothing it wrong with some spring cleaning :-).

So I decided to sell the following minor holdings in my portfolio to raise cash for some future targets.

positions sold :

CVS : I sold this position ( at a minor capital loss) because I was wrong about my investment thesis for this giant healthcare pharmacy name. I believed they would be able to keep growing their franchise & reward there shareholders with dividend raises and share buybacks, this has unfortunately been a 10 year treasury bill substitute for me and  I had to accept the inability of management to make meaningful decisions to spur capital gains.

WBA: Same logic for Walgreen boots alliance, a competitor that you find in many dividend ETF including VIG.

 

Both of those Pharmacy names have low profit margins and the mistake I have made is to believe that volume sales would compensate for it. No matter how big a company is it doesn’t automatically translate into strong economic moat

 

PFE: I sold Pfizer with a 40 % capital gain on the position & dividends I have received for the last 3 years now. I had to sale to raise cash for upcoming opportunities which I believe have better potential and stronger moat.

DIS: I sold my small stake I had in Disney, again not because I don’t like the brand name or management capacity to do fairly well but because I am targeting new opportunities that I believe will do better. I sold the position to a very small capital loss offset by the dividend I have received for the last few years.

 

What are my Targets now that I have raised cash ?

MMM: I have been looking forward to initiate a position in this company for some time now, I missed the last drop at around 180$/share but I am hoping to have the chance to initiate at around 185-190$ share. Sure there is going to be headwinds for this company because they do have a good portion of their sales outside the us but the product portfolio has always been in demand and I am confident I will do well in the long run.

MCO: Moody’s has been in my bucket list for a while now because companies need to have a credit rating it is just not optional. This is a growth stock and it has very little exposure to macro headwinds which is a + & it is in a duopoly position.

 

How to manage your portfolio exposure

There are a few good reasons why most professional well known portfolios do not go over 5% of exposure on any given stock. Algorithm and long term statistical data point to a specific way to preserve your capital and balance your risk reward variable.

Below are some of the rules that helped me generate around 20 % annual return for the last few years.

  1. Rule number one : do not have more than 5% exposure on any given stock.
  2.  Rule number two: do not have more than 20 % exposure on any given sector ( example Energy)
  3.  Rule number three: Do not fall in love with a growth stock. If this stock goes from 5% of your portfolio to 15 % in 2 years, be disciplined and sell some of it to put the exposure back to 5%. And proceed to buy another stock with the capital gain.
  4.  Rule number four: Embrace major pull backs, if one of your stock plunges 40 % in 8 weeks because of non sense short term fears, buy more of the stock. Chances are the stock will rebound and you will make more money over the long run.
  5.  You do not need to read to much specialized media, it will probably make you sell a stock at the wrong time and remember  those websites want to sell subscriptions and publicity ads. Concentrate on the balance sheets of the companies you are holding.

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