The focus in February was on the quarterly reports for my remaining holdings which did not report in January. I love this time of the year as most dividend hikes and payments are announced in this period. But there was something else that made the headlines this month; COVID-19 (or the Corona-virus). February started out great, but when the longer-term effects on the economy became clearer the stock market was suddenly reminded that there is risk involved when investing in stocks. My portfolio took a hit during the “Corona-week” and lost over 100.000 NOK in value and is now down 3.2% year to date.
I’ll not dwell much more about this topic in this report, since it is well covered elsewhere, but I believe that the decline in the stock market last week should act as a reminder and a chance to learn more about yourself as an investor.
If an investor is starting to panic when the market declines a little over 10% the investor’s risk tolerance is not in line with investing in the stock market, the portfolio is to heavily leveraged or the amount of experience does not match the holdings in your portfolio. Harsh words, but the reality is that most investors is not suited for investing in individual stocks and are better of purchasing index funds. For an investor the most important organ is not the brain, but the stomach!
Inexperience will cause you to doubt yourself and your decisions, and that is why I strongly recommend that you stick to your investment strategy instead of follow the headlines in the financial press! If you do not have a defined investment strategy you have to do your homework and start defining who you are in the stock market.
Here you can find more information about my strategy: Part 1 – The Investment Strategy
I do not focus so much on the panic in the media, but I try to exploit the increased uncertainty by increasing my positions in companies on my watchlist and adding to my holdings. Will the stock market continue to decline? I don’t know and anyone that claims they know should be disregarded as false prophets. What I do know is that I will keep purchasing high-quality companies with increasing earnings, profitability and dividends. In the long run I believe that the stock market is the best vehicle for highest value creation over time.
See comments at the end for transactions made in February.
Dividends in February:
Since all my holdings has reported at the end of February I can now review my organic dividend growth for the year. Organic dividend growth for the portfolio is the sum of changes in announced dividends multiplied with the holding’s share in the portfolio. Five companies did not announce a dividend increase, where of three was unexpected (UPM-Kymmene, Mowi and Cloetta), while Wartsila and Transalta did not change as expected. Currently the organic dividend growth is 8.7 %.
The dividends in February was paid out by Transalta Renewables, AbbVie, Aker BP and Equinor. Total dividends received was NOK 1.628, up from NOK 911 last year (increase of 79%). This is partly due to increases in company dividends, but the largest effect is due to higher yielding stocks paying out dividends in February compared to last year and a favourable USD / NOK. Currently I’m on track to receive NOK 31.000 in dividends this year, but as I keep adding cash into my portfolio and buying more assets this amount will increase.
I sold Elkem ASA at an average price of NOK 23 per share since I wanted to reduce my exposure to cyclical businesses with a high exposure to China. They also announced a dividend cut of 76% and my patience with the company had worn out.
Lerøy Seafood was sold at NOK 62 following a good report, but the company has the highest costs per produced kilo in the industry and I already own Bakkafrost and Mowi, which in my opinion is of a higher quality than Lerøy.
Two companies within the MedTech-sector was included this month. I also bought more in eight companies already in my portfolio during the “Corona-week”.
The company reported a solid Q4, but their guidance for 2020 was weak (i.e. Corona) and there was a lot of insider selling this month. I therefore initiated a position in the company.
Read my short write-up here: Vitrolife – profitable growth, but skyhigh valuation
About the company: The company develops, produces, services, leases, and distributes medical devices for cardio-vascular surgery in the United States, Europe, Asia, and internationally. It operates through three segments: Lease of Equipment, Capital and Consumable Sales, and Distribution and Sales of Third Party Products.
The company will benefit from an ageing population, since most cardiac surgeries are performed on the elderly population, but they will also benefit from lifestyle changes that translate into higher rates of the conditions of overweight and obesity.