Deep Value Dividend Growth Index Week 18 Update: Trump Trade Unravels And We Take Full Advantage

Posted On March 28, 2017 11:07 pm

Click here to read up on the intro to this portfolio, the theory behind it, and its methodology.

Not surprisingly, the Trump rally ran out of steam last week, thanks to the failure of the GOP led House to pass the American Healthcare Act; it’s plan to repeal and replace Obamacare.  This caused Wall Street to question how quickly, and to what extent it could live up to its promises to reform taxes, regulations, and increase infrastructure spending.

So while the Dow was declining for eight straight days, its longest losing streak in six years, we were furiously taking advantage of the unraveling of the trump trade, mainly by buying financials, as well as adding to a few underpriced REITs and energy stocks. That was due to the recent collapse in oil prices, courtesy of the continued recovery in the US shale industry, which is causing the US Energy Information Administration to predict that US oil production will increase in 2017, and achieve a new record in 2018, (and then continue rising through 2025).

Luckily all our energy stocks are in the midstream MLP industry, meaning that their cash flow is not very commodity sensitive, as well as in driller service stocks, (which will benefit from increased drillin activity).

Portfolio Stats:

Portfolio Holdings: 200

Yield: 3.81% (S&P yield 1.94%)
Yield on Cost: 3.89%

Lowest Yielding Holdings:
MercadoLibre (MELI): 0.28%
Shire PLC (SHPG): 0.51%
NVIDIA (NVDA): 0.52%
MarketAccess Holdings (MKTX): 0.60%
Ball Corp (BLL): 0.71%
Dr. Reddy’s Laboratories (RDY): 0.74%
McKesson Corp (MKC): 0.75%
Charles Schwab (SCHD): 0.81%
Cintas (CTAS): 0.84%
Fedex (FDX): 0.86%

Highest Yielding Holdings:
Icahn Enterprises (IEP): 11.81%
New Residential Investment Corp (NRZ): 11.55%
Golar LNG Partners (GMLP): 10.68%
Dynagas LNG Partners (DLNG): 9.95%
KNOT Offshore Partners (KNOT): 9.43%
Sunoco Logistics Partners (SXL): 8.76%
Sprague Resources (SRLP): 8.54%
Alliance Holdings GP (AHGP): 8.50%
Starwood Property Trust (STWD): 8.40%
PennantPark Floating Rate Capital (PFLT): 8.33%

Valuation Metrics

PE: 15.19 (22% below S&P 500)

Price/Fair Value: 0.90

FCF Margin: 16.34% (vs S&P 500’s 14.85%)

Return on Assets: 7.35% (3% above S&P 500 average)

Return on Equity: 24.91% (17% above S&P 500 average)

Market Cap: $11.8 billion (86% below S&P 500 average)

Smallest Market Cap Holdings:
Jernigan Capital (JCAP): $204.3  million
Medequities Realty Trust (MRT): $347.8 million
Farmland Partners (FPI): $351.2 million
City Office REIT (CIO): $364.2 million
PennantPark Floating Rate Capital (PFLT): $366.7 million
Westwood Holdings Group (WHG): $462.1 million
Sprague Resources (SRLP): $570.6 million
Dynagas LNG Partners (DLNG): $617.8 million
Easterly Government Properties (DEA): $714.3 million
KNOT Offshore Partners (KNOP): $804.6 million

Largest Market Cap Holdings:
Apple (AAPL): $754.5 billion
JPMorgan Chase (JPM): $316.5 billion
Wells Fargo (WFC): $280.0 billion
AT&T (T): $255.2 billion
Bank Of America (BAC): $235.1 billion
Procter & Gamble (PG): $232.0 billion
Pfizer (PFE): $203.4 billion
Verizon Communications (VZ): $201.1 billion
Oracle (ORCL): $183.9 billion
Coca-Coal (KO): $182.1 billion
Anheuser-Bush InBev (BUD): $179.4 billion

Projected 5 Year Dividend Growth: 7.71% (31% above S&P 500 average)

Projected Annual Total Return: 11.6% (28% above the market’s historic CAGR since 1871)

Portfolio Composition: 

Consumer Cyclical:         28.92%
Healthcare:                         15.25%
REIT:                                     9.67%
Industrials:                           9.19%
Consumer Defensive:      9.10%
Energy:                                   8.44%
Finance:                                 7.70%
Basic Materials:                   4.68%
Tech:                                        3.85%
Utilities:                                  1.97%
Telecom:                                 1.21%

Smallest Holdings
Marathon Petroleum (MPC): 0.14%
Prologis (PLD): 0.15%
Prudential Fianancial (PRU): 0.15%
New Residential Investment Corp (NRZ): 0.15%
Spirit Realty (SRC): 0.15%
Sprague Resources (SRLP): 0.16%
Anheuser-Bush InBev (BUD): 0.16%
MedEquities Trust (MRT): 0.16%
City Office REIT (CIO): 0.16%
Booze Allen Hamilton (BAH): 0.16%

Smallest 10 Holdings: 1.54%

Largest Holdings:
DineEquity (DIN): 7.77%
L Brands (LB): 3.99%
Perrigo (PRGO): 3.13%
Teva Pharmaceuticals (TEVA): 2.53%
HollyFrontier (HFC): 1.93%
Thor Industries (THO): 1.88%
VF Corp (VFC): 1.63%
CVS Health (CVS): 1.61%
Gilead Sciences (GILD): 1.58%
B&G Foods (BGS): 1.52%

Top 10 Holdings: 27.57%

Worst Performers:
Toyota (TM): -7.24%
Macerich (MAC): -7.20%
Simon Property Group (SPG): -7.07%
HollyFrontier (HFC): -6.95%
L Brands (LB): -6.77%
Target (TGT): -6.64%
Alliance Holdings GP (AHGP): -6.61%
Icahn Enterprises (IEP): -6.32%
Perrigo (PRGO): -6.28%
Kimco Realty (KIM): -5.96%

Best Performers:

NetEase (NTES): 32.84%
NextEra Energy Partners (NEP): 30.92%
Broadcom (AVGO): 29.57%
Apple (AAPL): 28.62%
Skyworks Solutions (SWKS): 27.43%
Philip Morris International (PM): 26.27%
KLA-Tencor (KLAC): 25.86%
Delphi (DLPH): 25.59%
Hasbro (HAS): 23.23%
Jernigan Capital (JCAP): 21.69%

Portfolio Performance:

Portfolio Annualized Total Return: 9.68%
S&P 500: 8.07%
Outperformance (Alpha): 1.61% (18 straight weeks of beating market,  by 20% so far)

What I’m Watching This Week

In the past two weeks Gallup’s poll of a rolling 14 day average consumer spending per day has been trending downwards, which seems to indicate that perhaps confidence is waning, and US economic growth won’t accelerate as hoped for. 10 Year Treasury Yields have pulled back a bit, indicating the market is pricing in a lack of growth acceleration.

So I’ll be watching the economic data to see how consumer confidence, and housing prices hold up. However, the big news is Thursday’s first reading of Q1 GDP, which the Atlanta Fed is projecting will come in at a disappointing 1%, while the New York Fed is predicting a far more optimistic 3.0%. Analyst consensus is split down the middle at 2.0%.



About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I currently write for both Seeking Alpha, Simply Safe Dividends, and DividendSensei.com My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams, and enrich their lives. With 22 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams. I'm currently on an epic quest to build a broadly diversified, high-quality, high-yield dividend growth portfolio that: 1. Pays a 5% yield 2. Offers 7% annual dividend growth 3. Pays dividends AT LEAST on a weekly, but preferably, daily basis

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