Oct 28 min read

The Portfolio: 24Q3

This issue of The Portfolio is a summary of my financial situation for the 2024 Q3. The other posts (previous quarters) can be found at links at the bottom of this webpage, under Continue Reading. You can also download the full post in PDF below.

“Post” Thoughts: The Recap

After being able to sit with the report and ruminating on all the information and with my perspective, here are my thoughts; both political parties practice trickle-down economics via crony capitalism to set low living standards for the majority (working class). In recent years, the governing class has publicly displayed who & what is worth investing in; and unfortunately, that's not ending homelessness, hunger, war, or poverty. In the portfolio, gains were redistributed to other stocks, changing pretty much every category. Investing-wise, the Top 10 Holdings focus is to get more offensive and prepare for the possible downturn through dividend income, while taking advantage of the greed and market manipulation going on. Due to the reallocation, the Top Holding changed and total decreased. The Watchlist changed, and Brookfield Wealth replaced Brookfield Corporation due to our increasing interest in insurance. When looking at The Top Performers, I see Japanese insurance/ finance sector steady rise, global companies are also benefiting (probably through M&A), and the US financial sector (specifically money markets), fundraising to combat continuing instability. The Worst Performers supports the news that consumers are hurting (especially lower income earners) in every category; consumer goods, leisure/ entertainment, banking, and real estate. Dividend Payout resulted in ⅔ being worst performer and ⅓ being a top performer. We find that, the market always backs finance at the end of the day, consumer staples show the consumer struggling but continue to persist the raising “temperatures”. Investment Strategy: for those of us limited to only USD, is to bet on essentials and state-ordered goods & services. Treasury bills, utilities, healthcare, insurance, and large financial institutions are the best options. That being said, the strategy may not be enough to counter the risks of USD exodus, dedollarization, and multipolarity. When nations divest in the US, corporations invest in our adversaries, and consumers struggling to pay essential, yet alone spend the country out of a deficit.

The Portfolio

Buy, Sell, Watch

The portfolio is still positioned to capture possible gains discussed in Recap section, with any modifications being further covered in the Investment Strategy section. Selling this quarter was more concentrated on capturing gains, a continuation of 24Q2. Buying, focused on foreign picks & finance. Most allocation is in the sectors financial, consumer, and communication, and the least allocation in technology. With ongoing market uncertainty, sticking around consumer goods & services like, groceries, utilities, and healthcare will provide much needed safety.

24Q2: I sold shares in USDC, AGM, AXP, KBWD, RTX, AFL, VICI, KBR, UBS, AAPL, CMF, MRK,MSFT, & SCCO and added BNRE, USDC, HKXCY, AGM, CMCSA, DGIN, DHT, PIN, BN, SPXS, KIE, VZ, KO, STWD, DTEGY, DIS, TOLZ, UBS, CME, DG, CP, LEMB, BAM, USB, LAZ, GFL, WMMVY, & TMUS. Stocks on my watchlist: ALLY, BAM, BNRE, CP, IBN, PIN, MSFT, SCCO, AXP, KIE, HKXCY, CMCSA, TMUS, & JPM.

24Q3: I sold my position in UBER & RTX, and sold shares in AAPL, MSFT, SCCO, SPGM, JPM, AGM, MRK, AXP, ALLY, ADDYY, USDC and added HMC, MUFG, USDC, PIN, DHT, EMLC, KIE, VICI, LAZ, BNT, DG, GFL, WMMVY, TMUS, DIS, USB, FLTR, OHI, ETH, SPXS, & HKXCY. Stocks on my watchlist: ALLY, BAM, BNT, CP, IBN, PIN, AXP, KIE, HKXCY, CMCSA, TMUS, & JPM.

Top 10 Allstars

This section discusses/reports on the top holdings of the portfolio. Due to the sale of successful stocks, the list has changed quite a bit. ETF picking is a lot easier than stock picking, which is how ProShares DJ Brookfield Global Infrastructure ETF (TOLZ) reached the top of the list. TOLZ holdings include utilities, energy, industrials, real estate, and communication. Shares of Ally (ALLY) were sold due to limit sell orders being fulfilled, dropping its placement. Brookfield Asset Management (BAM) & Omega Healthcare Investors (OHI) were added to WES:RS. Brookfield Reinsurance (BNRE) changed its name to Brookfield Wealth (BNT).

24Q2: ALLY, TOLZ, VZ, UL, CP, BAM, OHI, BN, DIS, & USB.

24Q3: TOLZ, VZ, UL, ALLY, CP, LAZ, BN, USB, KO, & AFL.

Small Bets

This section is composed of the smallest positions. Southern Copper (SCCO) and American Express (AXP) have been sold for gains and reallocated elsewhere. Invesco KBW High Dividend Yield Financial ETF (KBWD) was initially set to be sold off, but then decided to dollar cost average until limit order is hit. RTX Corporation (RTX) finally exited, cannot casually support genocide and death for dividends & capital gains.

24Q2 Tickers: RTX, KBWD, & SCCO

24Q3 Tickers: AXP, SCCO, SPXS & KBWD

Top Performers

This section is composed of the top performing positions. Whales are working overtime to keep the economy afloat. The portfolio is overweight in financials, with that being said, the best performing sectors are technology, real estate, and healthcare.

24Q2 Tickers: AFL, SPGM & ALLY

24Q3 Tickers: AFL, XLU, & OHI

Worst Performers

This list is composed of the worst performing positions. Disney (DIS) managed to land on the list, hopefully we can start seeing the turnaround in the stock by years end. Consumer staples and commercial real estate has continued to be punished for high rates and struggling consumers. Dollar General (DG) has been beaten bad, leading negative reading for entire sector in the portfolio, and Robinhood (HOOD) and SoFi (SOFI) are sinking the financial sector. AT&T (T) was the worst in the sector, but the entire sector is suffering, except T-Mobile (TMUS) & of course Deutsche Telekom (DTEGY).

24Q2 Tickers: DG, CMCSA, USB, DIS, & STWD.

24Q3 Tickers: HOOD, DG, SOFI, DIS, & WBD.

Dividend Payout

Top Dividend Payers this quarter were TOLZ, VZ, & XLU. This quarter's dividend total: $141.24, (previous quarter: $151.05). Jul. $50.39, Aug. $49.60, & Sept. $41.25. Total of 53 payments made. Dividend Calendar displays the tickers, total payouts, and amount of each payout from 2021 to current. [PDF] Chart 2 (right) is an overlay chart displaying each payment by month. Chart 3 is an overlay chart that displays all dividend payouts, with the lowest & highest years in bar form. Chart 4 is a line chart starting from 2021 to current.

SURVIVING CAPITALISM:

EUTHERMIA

Similar to a bear waking from its hibernation, people are beginning to shake off the mental fog from the Covid era. Back to (a sense of) normalcy; society is looking for a new baseline and people are trying to reconcile “what used to be” and “what is”. We have survived the Great Financial Crisis (GFC) where banks failed and families lost their homes (& retirement); followed by a taxpayer sponsored bailout & an economic expansion that 5x the stock market, but didn’t restore people’s retirement, homes, or benefit them financially. The Federal government (whether Democrat or Republican) have peddled trickle-down economics through crony-capitalism, distracting the public with scandal, charity, and spectacle. Not enough substantive benefit for the masses, resulted in civil unrest and clashes with institutions and corporations; highlighted by the BLM movement. By the time Covid hit the shores, the country was already divided, exacerbated by wealth inequality, race relations, and government overreach. Government's response to Covid was lockdowns, more bailouts, rate increases, and to appease the masses, a couple checks, resulting in the Great Resignation, skyrocketing inflation, and rolling recessions. Post-Covid, supply chains are restructuring, high prices have benefitted employment data, and inflation has leveled out; concurrently, living wage demands increase, and the consumer is left to power the economy through every crisis. According to the data, households have learned from the Great Financial Crisis (GFC) of 2007-2008, resulting in less credit card delinquencies, but that doesn’t mean American consumers & taxpayers have not spent our way through multiple rate hikes and halfway through a recession. A recent analysis of household debt by the New York Fed found that Americans owe a collective $17.7 trillion on consumer loans, student loans, and mortgages. [...]

[Download PDF for full report]

Investment Strategy

Domestically, trends suggest mergers & acquisitions (M&A) continue to curb competition and consolidate market share throughout industries such as: media/ telecom, utilities, food, and finance, into the hands of a few companies, all the same, market consensus is to wait until after the election for substantial M&A.

Private equity firms & asset management companies will play a pivotal role in the financial markets in the upcoming years, considering market consolidation, desire for real assets, and interest in tokenization of those assets. NBFIs have expanded & grown too rapidly (according to policymakers) that their business exposes the treasury market and broader financial system to risks of loss of liquidity, destabilizing positions, margin calls, and increased volatility. To further protect the USD from dedollarization, the Wall Street titan, BlackRock, warned investors with cash in reserves to start moving to bond funds or etfs.

The strategy going forward to take advantage of all discussed in the Outlook section, while hedging against the Risks considered. Recession fears are capped at minimum concerns; even though currently the US is estimated to run at a $1.6 trillion deficit in FY 2024, rising to $1.8 trillion next year. The FOMC begun lowering rates and essentially QE, likely due to the ballooning debt, and NBFIs/ family offices are expected to add $2 trillion in assets by 2030, not to mention investors like Warren Buffett sitting on $277 billion in cash now waiting for the right deals. So, any meaningful pullback or correction could trigger dry powder to enter the market.

The strategy also includes investing in growing markets around the world, both emerging and developed. Particularly, Brazil, Mexico, India, Nigeria, and now also Japan. Lowering of the federal fund rate, will require a pivot in the WES:RS portfolio and saving plans in general. Regarding each sector in the portfolio: [Download PDF for full report]

DISCLAIMER

This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. Moralcap (or West Elephant Solutions) has no duty or obligation to update the information contained herein.

Further, Moralcap makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.

This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources.

West Elephant Solutions (“W.E.S.”) believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.

This memorandum, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of West Elephant Solutions.