Outlook for December 2015

Earning season for Q3 is behind us and we are already looking forward to the end of the year. Was it just me or did you feel this year just fly by? The global economy continues to teeter precariously as deflation continues to rear its ugly head following collapse of commodity markets. Across the world, we have seen central banks ease and/or cut rates to stimulate their economies. However, this does not seem to bother the US Fed and they are ready to raise the rates in December 2015 – as they seem to have painted themselves into a corner with guidance and commitments that shouldnt have been made in the first place. Economists who are calling this a serious potential policy error that will simply kickstart the next recession and will need policy-reversal make a really strong case.

All in all, its been an eventful fall so far with the earnings season keeping the media busy. On a personal investment front, the outlook for December 2015 remains the same – stay patient, wait for the market to panic and invest for the long term if an opportunity presents itself.

Outlook for December 2015

In February, we started putting together an index-based ETF portfolio for my wife’s portfolio. In order to avoid buying at a market top, we started off with a modest amount of funds put to work. We will continue building our position over the course of the year. The portfolio details are shared here. As for my portfolio, I hold a decent amount of cash as discussed in my 2015 goals post. I am well above the 3-5% of cash position target to take advantage of market corrections.

Portfolio-Nov302015

Portfolio Considerations

I’ve made plenty of new purchases over the course of summer and am spread thin. For the remainder of the year, I intend to add and build on the existing positions instead of adding new names (unless something un-passable comes up). A lot of the companies are attractively priced and the following table details my portfolio holdings and some metrics associated.

Some companies such as Power Corp of Canada (POW.TO) and Magna International (MG.TO) provide a fantastic valuation with current P/E of 8.0 and 9.58 respectively. Forward-looking earnings growth also looks good for some companies and I intend to keep a close eye on the valuations while I make any potential moves. Another aspect that I intend to keep an eye on, is the current portfolio diversification. My current portfolio diversification is shown below.

Diversification-Nov2015

Dividend Increases

I am expecting dividend increase announcements from the following companies in my portfolio.

  • (Maybe) Archer Daniels Midland (ADM) – last increase was 16.66% in Feb 2015
  • AT&T Inc (T) – last increase was 2.2% in December 2014
  • (Maybe) General Electric (GE) – last increase was 4.54% in December 2014
  • Realty Income Corp (O) – last increase was 0.26% in September 2015

What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below as I value reading your questions and comments.

Disclosure: My full list of holdings is available here.

Photo Credit: Sage Solar

12 thoughts on “Outlook for December 2015

  1. Thanks for sharing your outlook R2R. As you know, I am way over weight cash in our portfolios as well. Other than selective purchases we’re looking for better opportunities in the future. I think General Electric will give us a good dividend raise, and is exactly the type of company that tends to outperform in the late stages of a bull market.

    We’ll see what happens with the potential Fed rate hike. I think it could go either way. In my opinion, all their talk about the rate raise is little more than Fischer trying to reintroduce uncertainty into the investor consciousnesses. Unfortunately for Canada, and most of the emerging market currencies, I expect the dollar to continue strengthening against those other currencies.

    At the moment, I like strong domestic companies like Fastenal……agricultural commodities………and a few deep value plays. It looks like I will rejoin you as an ADM shareholder at some point, but only if it goes much lower. At the moment…..I have to be patient. Fortunately, I have a trip coming up to distract!
    -Bryan

    • GE has had quite a runup lately – and after a lot of temptation late last year and early this year, I missed out on adding more. I think I will wait for the next recession to add more shares to GE. I like that its shedding all the financial parts of the company and really like where its headed.

      I agree with your take on the currencies. The US$ is not done with its bull run and it has a lot more legs left. With the problems in Euro – not just economic, but also political – the one currency that looked like it would become a global standard is left questioning its future – so, US$ still remains king when it comes to the currency markets. A weak CAD$ is fine by me – I own a lot of my investments in US that I picked up when the US$ was on par with CAD$ 🙂

      ADM is looking very attractive now that it is back down into the mid-30s. I dont mind this price at all…I think its just a little higher than my original initiation price on the stock. And Ive been collecting those reliable dividends quarter after quarter. Looking forward to add more potentially.

      Thanks for stopping by and sharing your thoughts
      R2R

  2. Roadmap,

    Sometimes if a good valuation occurs for a buying opp on a position you already hold – never a bad thing! Looking forward to AT&T’s dividend increase this month – with DirectTv in the mix – wonder what the cash flow can bring this year, right? And guesses?

    -Lanny

    • Hi Lanny,
      Valuations for companies that are in my portfolio are decent – and I wouldnt mind adding them at all. I hold a decent number of companies and am not really looking to add more except for a couple of subsectors – such as insurance and industrial names maybe.

      I havent really researched how much DirecTV’s business will add to AT&T’s cash flow – Im sure someone has already looked into that and analyzed, just havent read it and/or remember it. With a high yielder like AT&T, even a small raise like 2-2.5% would be fine. They still have a pretty high payout ratio based on current EPS.

      R2R

  3. Hey R2R, good job on the portfolio looking good. With all the talk of climate change etc, would suggest a look at BEP-UN.TO aswell, seems to be in good hands under the brookfield umbrella.
    Keep up the good work

    cheers
    T

    • Thanks for stopping by and commenting, TFTT. I looked at BEP and it looked pretty interesting….but from what I gathered, they dont have much of a moat, although I like the overall business. I need to understand the space more before I can make a decision. I ended up picking up BIP instead, which has a much better moat and love the infrastructure business overall. I will revisit the renewable space and reevaluate. Thanks for the pointer.

      R2R

    • Glad you like it, Vivianne 🙂

      T looks like its well on its way to give us another raise. The DirecTV acquisition is going to add a lot to the top-line over the coming years…so, Im sure management will feel confident in giving us a good raise.
      R2R

  4. It was not just you, this year absolutely flew by. Its nuts!! I really like your strategy of waiting for the market to panic to make some moves. Im a real estate investor but am really considering dipping into the markets and if I do, i want to go about it the same way you are. Buy low! And I really want to get into ETFs.

    So to touch on that, are you planning on buying more ETFs when the market panics? What is your strategy on when is the best time to buy ETFs?

    • Hey Alexander,
      Thanks for stopping by. I’ll have to stop by and check out your blog.
      We have been hovering close to the market top for a while – and the Fed raising interest rates could potentially send investors to panic and I am waiting for that opportunity.

      Investing via ETFs is a great way to start when you are getting familiar and comfortable with the stock market. It is going to be hard to judge when the market will bottom out – so your best bet is to dollar-cost average into your position. The good thing about ETFs is that you achieve instant diversification. Just do your research and figure out what ETFs you want to buy – for e.g., a popular option is to go with three funds – one for US equities, one for international equities and one for fixed income. That should cover most of your investing needs. Vanguard funds are probably the best option.

      I have shared some thoughts in this article: http://roadmap2retire.com/2015/02/building-etf-portfolio/

      cheers
      R2R

  5. You look pretty well diversified R2R. I wish I had a little more cash to deploy at the moment – there’s a couple of great quality businesses in the commodities space which are being punished right now, and I’d love to build a big position if I could! Hoping for you that some of these great businesses get even cheaper in the coming months and you can put that cash to good use!

    Cheers,

    Jason

    • Hi Jason,
      Its been one of my goals this year – keeping some powder dry. Last year I missed out on some great investing opportunities as I was fully invested and didnt have any cash available when the markets tanked in fall with the oil rout. I have made it a point to always keep some cash available with a minimum cash in portfolio of about 3-5%.

      Thanks for stopping by
      R2R

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