Now there are 11 and it’s Real

According to the Schwab Newsroom dated today, beginning September 1, there will be a new sector added to the major classification system.

The current GICS started in 1999 as published byt the S&P.  There are 10 (or were 10 if you are reading this after Sept 1) classifications: Consumer Discretionary; Consumer Staples; Energy; Financials; Health Care; Industrial; Information Technology; Materials; Telecommunications; and Utilities. The 11th sector will be Real Estate.

10 Sectors

 

Formerly Real Estate was part of the Financial Sector. With current investing opportunites limited to stocks and bonds, real estate has been a new focus for many investors looking for better returns on invested capital. According to Schwab:

The new real estate sector will mostly be made up of equity real estate investment trusts (REITs), with some real estate development companies included. Equity REITs own physical property—such as apartment buildings, office property or shopping malls—and typically receive rental income. (Mortgage REITs, which own mortgages instead of physical property, will remain in the financials sector.)

For more information visit: http://www.schwab.com/insights/personal-finance/introducing-newest-sector-real-estate?cmp=em-QYD

EPD’s Secret Sauce (EPD:NYSE)

epd

I like EPD:NYSE, here’s why.

Morningstar had this to say about Enterprise Products Partners LP

EPD’s secret sauce is in its ability to aggregate supply from multiple sources and deliver it to multiple end-user markets, whether that involves export markets or the petrochemical industry.

EPD’s top cash flows

1. NGL transportation and services
2. crude oil pipelines
3. petrochemical facilities
4. exports

epdprojects

Some major projects adding to cash flow diversity: (Source)

1. the Seaway reversal
2. the PDH unit,
3. ethane export facility.

phd

EPD is in position to benefit any NGL growth, domestic or international.

Economic Moat

Analyst Peggy Connerty notes:

EPD operates within a niche segment of the energy
midstream value chain and has a natural economic moat
surrounding its operations

Here are some snippets of Peggy’s analysis of EPD
… The location of EPD’s energy infrastructure, including its proximity to refining centers along the Gulf Coast and pipeline connections to every ethylene steam cracker in the country.

…Extensive regulatory oversight of Enterprise’s assets acts as gateway for new entrants with many federal, state and local agencies involved in permitting, siting, pipeline rate setting/increasing, pipeline new build and abandonment
and power of eminent domain.

…Near monopoly status for many of its pipelines coupled with a fully integrated system, which connects multiple sources of supply with multiple end user markets…

Dividend Yield 6.45%

I consider this pullback on this stock as a buying opportunity even though the energy market is suffering losses and will likely continue to suffer losses for the foreseeable future. However in the long run, if I’m still alive, EPD is well positioned with integrated assets and geographic diversification.

Some estimates put real value at around $32, however that has been recently lowered from $36.

epdchart

I am adding more shares if price hits $23.75, current price is $24.19 (Friday market close). I will monitor this buy and make price changes based on short term market data and stock movement. I hope to capture more stock below $24 before the stock goes Ex-Date. Last Ex-Date was Jan 27, 2016 so the next ex date will be around April 27th.

Full disclosure: Bought Shares on 10/6/2008, stock is up 111.36%  the dividend has been re-invested. This will be my second limit buy of EPD.

RISK FACTORS
There is significant risk with this stock. Interest rates could go up, current legislation changes could affect EPD and all MLPs by making it more difficult to attract investors, raise capital and execute growth strategies. Plus there are weather risks such as hurricanes, spills, fires, and of course the ever loving explosions.

These are my ideas, always consider the source and make your own judgement.

Oil at 1950’s Prices

Chart of the day, Oil in the mid 20’s, the same price as the 1950’s. Some speculate that oil may fall as low as $18. If and when that happens we will have reached an investible bottom in Energy investments. My top energy holdings are CVX, VLO, OXY, KMI, EPD. Only VLO has outperformed the market and the sector.

Change in Sector Investing 2012-2015

The 2015 Beaglefolio

The Beaglefolio invests in 13 Sectors providing  both conservative capital appreciation through rents, royalties and dividends and medium risk growth investments at as core investment strategies.

ETF’s, Real Estate and BTFs (Bonds, Treasuries and Funds) are top three sectors in the YE 2015 Beaglefolio. In 2012 BTF, Tech and Energy were the top three sectors.

Energy

Energy
Energy made up 15% of total Beaglefolio assets in 2012. Due to loss in value and some selling of energy sector assets current holdings are just 6.4% of total assets.  CVX , VLO and OXY are core energy assets. Energy is ranked #7 of all Beaglefolio Assets.

2015 ETFETFs and Real Estate
The biggest swing in investing was starting to aggressively invest in ETFs in 2013 and new Real Estate investments were made in 2014 and 2015 .  Both investment sectors are at the top of the investment pyramid and both realized sizable increases in percentage of portfolio value over the past 3 years. ETF investments increased from 3% in 2012 to over 18% in 2015. All ETF and stock investments reinvest the dividends.

Below is a list of the Beaglefolio ETFs in order of total value as of 12/26/2015.

etfMorningstarHealthcare sector ETF: PJP was added to the Beaglefolio on 10/8/13. Morningstar rates PJP 5 stars. This ETF is up 56%. PJP has been a top performer since August 1, 2015 despite the volatility in the market.

Also in the healthcare sector PPH was added on 4/3/2014 and again on 7/7/2014.  It has returned 9.4%.

Food and Bev ETF: PBJ was added on 12/13/2013, returning a 28% return.

Small Business Sector ETF: SCHA was added on 6/4/2014 and Financial Sector EFT: XLF was added 3/20/2014. These EFTs have returned  1% and 7% respectively.

World AG EFT: CROP was initiated on 4/12/11 and 7/11/11. No further investments have been made to this EFT as it has languished at 6%. Morningstar now rates CROP a one star. Top CROP assets held by Japan, China, Australia, the US and Indonesia. With top food production plants in Canada, US, China, Thailand and New Zealand. Top fund holding is Nisshin Seifun Group

Going Forward
Additional real estate, EFT and stock investments will be considered during 2016. Stock sectors currently under evaluation are Tech, Financials, Discretionary and Health.

Buy DIS at $99

In my recent post, “Three $100 Buys on a Pullback” I suggested buying Disney (DIS) on a pullback to $100. However with the huge drop in price today (nearly 6%), I lowered my strike price to $99.

DIS

Disney did cross under in late trading but is now hovering around the $100 mark.  Adding DIS to my portfolio is the plan, saving an additional $1 share is hopefully a good idea because today I could have owned DIS at $100.

According to TD Ameritrade’s Social Indicators, in the last 7 days the DIS
brand has been tweeted 157,425 times with a 94% positive sentiment. In
the past 30 days, nearly a quarter of a million tweets were regarding the
Star Wars brand.

Here are some additional twitter tags and emojis that will help whip up the Star Wars fanatics:

Three $100 Buys on a Pullback

bfOwning any of these three investments on a pullback to $100 would be great additions to my Beaglefolio.

APPL – Apple Computer (full disclosure: I own APPL shares)
DIS – Disney
GLD – SPDR Gold Shares (ETF)



APPL – Weighing another Apple buy, currently trading at $114.88, an 11% pullback to $100 is not likely, but if it does I will be adding to my position. APPL is a great company with fantastic products that continue to do well in the world marketplace. There are still plenty of growth opportunities in new markets and new products. I rate this stock a long term hold and look for opportunities like this current market correction, to add AAPL.


DIS – Disney has a fantastic mix of businesses and a great social media pipeline. In the last 7 days the term Star Wars’ has been tweeted 167,170 times, Lusasfilm 88,160 times, ESPN 51,580, Marvel Studios 47,200 and Disneyland Resort 22,230 times. (Source: Ameritrade Social Indicators)

With Starwars on the horizon and a continuation the global expansion of the Disney brands, I would love to own DIS and it is possible if it pulls back just another 7% from its current price of $107.26


Gold bar or ingotGLD – Owning the ETF GLD is a much easier way to own gold than having the physical gold. As a contrarian investor, I look for good entry points on my investments and gold is starting to look good. Currently trading at $104.45, a pullback of 4.5% could certainly happen.

While everyone is selling gold I’m looking to buy my first lot of GLD, the gold ETF, if and when it hits $100. (Source: Buy GLD at $100)

 

 

Buy GLD at $100

As a contrarian investor, I look for good entry points on my investments and gold is starting to look good. While everyone is selling gold I’m looking to buy my first lot of GLD, the gold ETF, if and when it hits $100.

gld
Chart: One year of GLD (Gold EFT)

Can it go lower, surely but gold is something I want in my portfolio as an added measure of diversity. If gold does goes lower, I will consider a second lot.

As you can see by the chart of GLD, Gold has dropped to a new fresh set of lows. It could be argued the low price is due to low demand, a strong dollar, threat of higher interest rates, a rising stock market and more.

But if GLD does hit $100 it could go up just as easily. Eventually the strong dollar will weaken and as world economies pickup, so will demand for gold. With geopolitical uncertainties surrounding ISIS, Iran, the middle east and the Ukraine, the next act resulting in widespread FEAR could easily move gold higher.

spy
Chart: One Year SPY (S&P 500 EFT)

With stocks hitting new highs I’m on a holding pattern. GLD looks ripe for new investment money.

gld1
Chart: One Month GLD

Ben Bernanke’s Blog

Former Fed Chairman Ben Bernanke

Today Former Fed Chairman Ben Bernanke started a blog here: http://www.brookings.edu/blogs/ben-bernanke. Why now?

Here is an excerpt from Chairman Bernake’s blog explaining why:

On January 31, 2014, I left the chairmanship of the Fed in the capable hands of Janet Yellen. Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers. I look forward to doing that—periodically, when the spirit moves me—in this blog. I hope to educate, and I hope to learn something as well. Needless to say, my opinions are my own and do not necessarily reflect the views of my former colleagues at the Fed.

His first article: ‘Why are interest rates so low?‘ does and excellent job explaining why the Fed is keeping rates so low. A factor called the ‘equilibrium real interest rate’ is a factor that the fed uses to assist in balancing inflation and employment rates. He also explains why keeping interest rates so low is not throwing seniors under the bus. An excellent read.

I will be looking out for Chairman Bernanke’s future blog posts.

MCD Answering question about Food Quality with Videos

McDonald’s stock has been suffering. One reason MCD is suffering is that people question the quality of McDonald’s food such as ‘are there beaks and feet in Chicken McNuggets?’ To answer that question and others McDonald’s shares it’s food production techniques in several videos.

In these videos MCD answers a questions concerning the quality and content of its food. See videos below for examples of MCDs effort to prove its uses only the best ingredients.

From McDonald’s: Is it real Chicken? Is the whole chicken used? Those ‘pink slime’ pictures, is it really an ingredient of Chicken McNuggets? One of the biggest questions about McDonald’s food is about what goes into our Chicken McNuggets, so Grant Imahara visited Tyson Foods, one of our suppliers to get you answers. Watch to see what goes into our Chicken McNuggets

Also from McDonald’s: Why is the egg in the Egg McMuffin round? Is it sliced from a roll? Are the eggs even real? Prompted by a question from a McDonald’s skeptic, Grant Imahara heads to Herbruck’s Poultry Ranch, an egg supplier for McDonald’s USA, to find the real story about our eggs. Watch and discover if McDonald’s eggs are real.

Also from McDonald’s: Does McDonald’s USA use real potatoes? Why do the fries always taste so good? Are they mashed and formed in a mold? There are a lot of questions about our fries so Grant Imahara is going to investigate our fry making process in his own way. Watch and discover how we make our World Famous Fries.

There are several other ‘Food Quality’ videos on the McDonald’s YouTube Channel. Will these videos answer consumer questions and help customers understand that McDonald’s food is good food. (Just not gourmet)

Full Disclosure: I own MCD, I have a hold rating on this stock.