Gardening for Investors

Gardening for Investors

JULY 2018

mktsnap.png

S&P, Dow Jones and NASDAQ performance, June 2018

YCharts, Divine Asset

 

It’s July, and I am zealously gardening. I’ve invested in a solar powered vole deterrent that makes sounds underground that will (hopefully) freak the varmints right out of my beds. Each morning, I measure the peas climbing up the fence and concoct a comfrey-and-water tea to fertilize the veggies.  I hold grudges against the deer that ate the tops from my baby sunflowers last week. I find that I’m in a constant state of worry. Not the teeth-grinding flavor of worry; more of a mild, consistent nag. I am focused on organic gardening and snowflaking my way around varmint management, but I aim to get the kind of yields that the Roundup-toting, vole-drowners do.

My principles of gardening are pretty analogous to Divine’s principles of investing:

Formula Photo new (002).png

We set our intention on long term goals for our families and communities. We seek out value; generally, by investing in something we believe to be high-yielding and healthy (like yellow tomatoes in the garden, or alternative energy stocks in the market).  Being disciplined in our research and muffling out the “noise” (like voles or pundits on CNBC) is critical.  Good ideas take time, and compounding via dividend reinvestment (or saving seeds) is critical to building generational wealth.

Each month, I’ll be highlighting some trends, ideas, and idiocies that we’ve come across in the markets.  I would love to hear from you too, so please send your rants and raves! AND gardening advice please!!

 

The single greatest lesson the garden teaches is that our relationship to the planet need not be zero-sum, and that as long as the sun still shines and people still can plan and plant, think and do, we can, if we bother to try, find ways to provide for ourselves without diminishing the world.

— Michael Pollan

 

Isn’t that the truth? Investing teaches us a similar lesson, that our investible dollars are our vote on the future of the world. The long-term trends we see in business and life are investible, and how we put our money to work can improve the prospects for generations to come.

Divine’s “watch list” is a mile long, and we are always adding companies to review.  Many on our list are way outside our range, like Amazon (NASDAQ: AMZN $1,699.80) and Netflix (NASDAQ: NFLX $391.43).  Someday, they’ll be out of favor and will waltz into our buying range, but for now we are just fangirls. About 80% of our watchlist is made up of dividend-paying issuers, however, growth companies that are the nuclei to a long-term trend are always interesting. 

CEVA (NASDAQ CEVA $30.20) is a leading worldwide licensor of intellectual property related to mobile phone technology, automotive, industrial and consumer electronics. It ranks number 52 among the Fortune 100 Fastest Growing Companies and Apple Inc. (NASDAQ: AAPL $185.11) and Intel Corp. (NASDAQ: INTC $49.71) are among its major licensees. We believe CEVA is a pure play for the IoT (Internet of Things) space -- connecting billions of physical devices around the world that are now connected to the internet, collecting and sharing data. The company is moving towards what is anticipated to be a more robust revenue stream from their licensing platforms and is adding new, first-time licensees each quarter.  

CEVA came off all-time highs and has been trading around $30.  We have been adding to positions and will continue to be buyers of this little gem for the foreseeable near-term.

We plan to “Go Further” with Ford (NYSE: F $11.07) which is yielding over 5.5% and at a 6 PE, is trading at half the price/earnings ratio of the rest of the auto industry. Aside from January 2018, U.S. monthly sales have remained between 200,000 and 250,000 vehicles. Ford’s strategy of dropping the sedans and focusing on trucks and SUVs is working; Ford’s F-Series continued its momentum of sales growth and exceeded 84,600 trucks in May, marking 13 straight months of gains. Ford posted a profit of $1.7 billion in the first quarter of 2018, which was an increase of 9% compared to results in the first quarter of 2017.  There is still significant uncertainty around tariffs going forward, as well as Ford’s China strategy, but this dividend paying icon will continue to drive us (haha!).

It will be interesting to see how the tariff threat plays out over the next few months.  It falls under my idiotic header, given the “bring jobs back to the US” stance that the current administration has rallied around.  When tariffs are imposed by the government of the United States (or any government, really), companies will build (and create jobs) outside the US to get around import/export costs and hurdles.  The imposition of tariffs to protect domestic industry from foreign competition also works to increase prices for domestic consumers.  It’s common sense (and generally agreed upon by economists) that free trade increases economic output as well as income.

A recent analysis by the Tax Foundation found that $37.5 billion in tariffs would lower GDP and wages by 0.1 percent, lower employment by the equivalent of 79,000 fewer full-time jobs in the long run, and make the US tax burden less progressive.

Harley Davison (NYSE: HOG $42.08) took action and announced an initiative June 25th to move their manufacturing (for vehicles that would be sold outside the US) to – wait for it--- countries outside the US.  Bye-bye jobs.  I have included links to some of the articles below.

 

https://www.ft.com/content/54a6cc82-7867-11e8-8e67-1e1a0846c475

http://www.dw.com/en/harley-davidson-to-shift-production-overseas-as-eu-tariffs-bite/a-44386550

https://www.wsj.com/articles/harley-davidson-to-shift-production-overseas-to-offset-eu-tariffs-1529927301

https://www.nytimes.com/2018/06/25/business/harley-davidson-us-eu-tariffs.html

 

There is no gardening without humility. Nature is constantly sending even its oldest scholars to the bottom of the class for some egregious blunder. — Alfred Austin

 

Have a wonderful July 4th holiday, God Bless America, and see you next month!

Love,

Dani

All quotes are as of market close June 29th, 2018.

 

DISCLAIMER!!!! The Divine Monthly Note newsletters are impersonal and do not provide individualized advice or recommendations for any specific subscriber or portfolio. Divine Asset Management is not soliciting an investment. Past performance is not necessarily indicative of future results. Investing involves substantial risk. Neither the author, the publisher, nor any of their respective affiliates make any guarantee or other promise as to any results that may be obtained from using the newsletter. No reader should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing the prospectus and other public filings of the issuer. To the maximum extent permitted by law, the author, the publisher and their respective affiliates disclaim any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations in the newsletters prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.

The commentary, analysis, opinions, advice and recommendations represent the personal and subjective views of the author and are subject to change at any time without notice. The information provided in the newsletter is obtained from sources which the author believes to be reliable. However, the author has not independently verified or otherwise investigated all such information. Neither the author, the publisher, nor any of their respective affiliates guarantee the accuracy or completeness of any such information. Neither the author, the publisher, nor any of their respective affiliates is responsible for any errors or omissions in any newsletter.