Thursday, December 17, 2015

McDonalds vs. Stag Industrial

MCD has been on a nice run the past several months, its time to sell the entire position.  I bought MCD a couple of years back, and while the dividend is still decent, the price is severely overvalued for their earnings and projections.  Here is a FastGraph for MCD:

Today's price of around $117 and a PE of 24.1 are just too high.  Based on company forecasts for next year, and analyst projections beyond that, you can estimate the annual return of the stock for next few it is graphically, and it sucks:

If they hit their growth projections, fair value for the stock is lower than today, returning -2.19% annually.  Forget it.

I'm booking a 45% gain in the stock since my purchase, and redeploying the $15k or so elsewhere. It's only $15k because I trimmed MCD several months ago....

I've decided to start a position with 1/2 the proceeds in STAG Industrial, an industrial REIT.  STAG is undervalued today, and it's yielding 7.4%!

Here is a graph for STAG:

STAG will be my 4th REIT holding in the portfolio joining O, OHI, and DLR.  I consider this a good swap for MCD, better valuation and better yield.  Here is the projected returns for STAG:

Fair value estimates give an annual return of 22.76% to the end of 2017, and an aggregate return of 52%.  And due to the undervaluation today, this investment gives a reasonable margin of safety.



Friday, November 6, 2015

November 6, 2015 Update: VRX, OHI, CMI, WAG

I haven't posted since 9-22-15, when I sold HAL, and added VRX, AMGN.  While I haven't posted, I have made a few trades from overseas while traveling.  Just a side note, it's hard to stay on top of your portfolio while working full time/traveling.  Who knew?

Anyway, after reading several articles about VRX, I closed my modest 1/3 position a few days after I started the position for a loss of around $500.  Good move, as the stock has been pummeled down into the $75 range with a continuing stream of bad news.  Lesson learned (again), stop buying "growth" stocks with no dividend track record....

The AMGN purchase (long, growing dividend) was good, and I made add a bit more.  Today, there is a positive employment report, so high yield stocks are getting beat up pretty good...which is most of my stocks in the Chump IRA....why?  Because this means the fed will finally raise interest rates.  Doubtful.

I added some OHI and CMI today, both are down quite a bit.  I also closed WAG the other day on the news that they would be buying Rite Aid.  The stock was up to over $94/share, was already pretty pricey, and I figured it would correct once the news was digested...and it did, down over 10% since I closed the position.

Now I have some extra cash, a bit more than normal, so I'm looking for buys.....  stay tuned.


Tuesday, September 22, 2015

Selling HAL, Buying AMGN, VRX

The market (S&P 500) is down over 1.5% today as I write this....

Looking at the portfolio, I tend to be underweight life science, medical, healthcare, biotech...all areas that will benefit from an aging population (me included).  I'm also heavy in energy and industrial, so I decided to sell HAL today.  Nothing against HAL, except of course really low oil prices, which will prevent capital spending on oil exploration, which really hurts Halliburton for awhile.  That coupled with a pretty small dividend, I might as well move to something with more growth potential, heh? Anyway, believe it or not, I was up around 13% on my HAL investment (over 3 years, ugh).

Here is a breakdown of my "sectors" from Fidelity (before my trades today) :

So selling HAL (energy) and adding healthcare makes some sense... as would reducing the industrial exposure a bit, but they are just so well priced right now I can't resist, especially CMI....

In the health sector, I've been watching GILD, AMGN, ANTM, MCK, and VRX.  I already own all of these except VRX, GILD, ANTM, and MCK in my taxable stock account, and I've been waiting for a good entry point.  Hillary tweated today that she would like to punish drug companies, and even named VRX (Valeant), which sent the stock down over 5.5% today....hah, a good entry point is born.  Thank you Hillary (wow, did I really just say that?)

Started a position 1/3 at $116 ish.  I know, no dividend, but I really like the growth:

I also added a little to my AMGN position, which is now almost a full one.  Adding VRX to the Chump IRA is not ideal, I don't tend to like no-dividend stocks, but in this case, it's where the cash was, and I could use some growth.....

That's all for today.


Wednesday, August 26, 2015


I like MCK at these price levels...however the dividend is very small at around 0.6% yield, and not very stable.  That said, I'm starting a position in my taxable account, where I hold stocks that are perhaps a bit more speculative, and tend to have higher growth, lower dividend profiles.

Here is a FASTGraph:

Friday, August 21, 2015

Shopping Today...UNP, CMI, selling GE

Adding some UNP to earlier position...nice pricing today.  Also started a position in Cummins (CMI).  I've been watching CMI for several weeks, and I really like it at these levels.  I'm pretty heavy in industrials, so I sold my position in GE and replaced it with the CMI purchase.  I lose a little yield (3.7% down to 3.1%), but I gain diversification.   I added UTX awhile back, and I like that stock better than GE.....

More to follow...


Tuesday, August 4, 2015

Valuation Check of the Portfolio

Comparing normal PE ratios for the past 5 years, with current PE ratio for each holding gives a sense of valuation.  If a holding is well above it's normal 5 year PE, it's likely to revert to that average in the coming months/years.  Further, these stocks are usually more susceptible to a correction, and get hit harder when the overall market drops.  With this in mind, I mapped my holdings here:

Per these valuations, I recently trimmed MDT and WBA, which were larger holdings in the portfolio.  I will likely also trim MO and ALK in the coming days, which have also grown large in the portfolio.

On the buy side, I've added to UNP, UTX, and TUP recently....all in the green.

That's all for now,


Friday, July 31, 2015

Tweaking the Portfolio....DLR, XOM, TUP, UNP, WBA, MDT

Busy at work lately, but looking at the Chump IRA this week a little more closely.  First, I trimmed a couple of strong performers that are trading at 52 week highs, which is NOT a reason to trim, but are also looking very overvalued, which IS a reason to trim.  WBA and MDT, both of which have been great performers the past several years.  I trimmed both back to a full position in the portfolio, around $18k each.

On the buy side, I started a position in XOM in the low eighties, then added a bit more today around $ the company and dividend for the long haul.

I also added to technology REIT DLR.  I love DLR right now at these prices, and a 5.3% yield. Strong buy recommendation.

I'm also looking at TUP again.  I've suffered a huge 27% loss on the stock, but am going to add some shares at $58.50.  It has a nice dividend of 4.7%, which is flat this year, but wasn't cut.  I just read a good interview with the CEO, Rick Goings.... here it is:

I like his comments, his commitment to the dividend, and I think the company is a long term hold.  They are suffering this year from the strong dollar, but that should normalize and improve going forward.

UNP, another railroad, is looking attractive at recent depressed prices, and like in Monopoly, I want to own ALL the railroads, wide moats, great businesses.  With a new position in UNP, I now own three, CSX, NSC, and UNP.  Cool!

That's all for now,


Monday, June 29, 2015

Adding Some UNP and Some AMGN Today

Market is down over 1.5% due to Greece news....I've been eyeing several stocks including:  UTX, XOM, CBI, EMR, UNP, and AMGN....

Put limit orders in for more XOM, and a 1/3 starting position in UNP at around $95.35....  I used to play Monopoly as a kid, and I always loved owning the railroads, what can I say?

I own CSX already in the IRA, and Norfolk Southern in my taxable account.  I like the growth prospects of Union Pacific, and its at a 52 week low today, M* has it as a 4 star stock, and here is the FAST Graph overview graphic:

Best Chump

Tuesday, May 26, 2015

Adding OHI, Starting a Position in XOM

After selling COP on an up day last week, I used some of the proceeds to add to OHI (existing position), and started a 1/3 position in XOM today, which is down 1.5%.  Limit for XOM was filled at $85.21....I happy with the trade from COP to XOM, and adding OHI helped offset the lower yield at XOM vs. COP.

I also added a little to my UTX position on big down day.....


Thursday, May 21, 2015

Selling COP

COP is up today over 1%, I'm selling it.  Since purchase a few years ago, I'm up around 12.5% on the investment, but it's time to move the money elsewhere.  It looks as though they will be freezing the dividend for several years, and growth prospects are pretty poor.

I'm thinking of redeploying the proceeds to try to get the 4.5% dividend income elsewhere. Candidates today are OHI, DLR, CVX, and XOM.  Of these, only XOM would be a new name in the portfolio.

Good article on SA today from Tim McAleenan Jr. was the catalyst for my decision.

In energy, I still own HAL, KMI, BBL, CVX.

Maybe combining more REIT dividends with the lower dividend from XOM (3.4%) will be a good trade....still considering options.



Thursday, April 23, 2015

Selling BAX

I think it's time to sell BAX.  It's been a poor performer, down around 5% since I bought it.  They had a poor EPS quarter to end 2014, and another poor quarter to start 2015 (see below).  The stock is UP today on improved 2015 full year guidance, but I don't believe them.

Furthermore, they are doing a spin off this year, and I don't know what the new companies will like post spin, nor do I know what impact this will have on the dividend.  Time to look for a better company to invest in.

Possibly Abbvie....we'll see.  Limit order placed just above latest price.


Friday, April 17, 2015

Adding to DLR position

Market is down 1%, adding a little my DLR position, initiated last week.


Monday, April 13, 2015

YTD 2015 Performance vs. the S&P 500 and 1Q Dividends

The market and portfolio have had a rocky 1st quarter.  Below is a graphic that shows the Chump IRA total value, and it's weekly returns vs. the S&P 500 with dividends reinvested:

Both the Chump IRA and the S&P 500 are shy of 3% year to date, which seems slow/rocky, but heck, if this keeps up, we'd have a 10%-12% year, which would be great vs. history.  The portfolio tracks the S&P pretty closely, but I'll keep looking for value plays to give it a boost over the long run.

The portfolio contains several "unloved" stocks that I'm betting will have a nice run eventually.
These include:
  • BBL
  • TUP
  • BAX
  • HAL
  • CVX
  • COP
  • PM
  • IBM
BBL, HAL, CVX, and COP are all related to oil and energy, and have been beaten up pretty good this year, while IBM, BAX, PM, and TUP are just viewed negatively by wall street, largely due to the strong dollar and exposure to depressed earnings from abroad.  All these companies are fine, they just need a bit of time, so I hold.

On the dividends front, they just keep growing (and reinvesting).  Here is the dividend table, with 1Q2015 added:

Dividends collected in the first quarter were up 7.6% vs. prior year, and above $4,000.   With the recent sale of Walmart, and the addition of better dividend payers, this growth will continue!

Here are the current portfolio names:



Tuesday, April 7, 2015

DLR...Digital Realty Trust

Starting a position today in DLR.  Here is a snapshot from FASTGraphs:

With this addition, I have around 7% of the portfolio in real estate via REITs...  O, OHI, and now DLR.  Chuck Carnevale recently did a nice piece on DLR here: 

In addition, Mr. REIT, Brad Thomas, has it on his list of top investment ideas for 2015.  At present, DLR is paying a nice yield of 5.1%, has a good credit rating for a REIT, and is moderately undervalued on a FFO (funds from operations) basis.

DLR invests in technical space for servers, back up data, etc.... a fast growing market as internet and cloud spending increase exponentially.

I'll look to add more to the position if interest rates rise this summer.  That event would properly hammer REIT prices temporarily, and present a nice opportunity to add to positions.



Tuesday, March 3, 2015

Good vs. Evil...Great Column from Dennis Prager

Why Obama So Dislikes Netanyahu

Tuesday, Mar 3, 2015
There is no question about whether President Obama — along with Secretary of State John Kerry and the editorial pages of many newspapers — has a particular dislike of Israeli Prime Minister Benjamin Netanyahu.
But there is another question: Why?
And the answer is due to an important rule of life that too few people are aware of:
Those who do not confront evil resent those who do.
Take the case at hand. The prime minister of Israel is at the forefront of the greatest battle against evil in our time — the battle against violent Muslims. No country other than Israel is threatened with extinction, and it is Iran and the many Islamic terror organizations that pose that threat.
It only makes sense, then, that no other country feels the need to warn the world about Iran and Islamic terror as much as Israel. That’s why when Benjamin Netanyahu speaks to the United Nations about the threat Iran poses to his country’s survival and about the metastasizing cancer of Islamist violence, he, unfortunately, stands alone.
Virtually everyone listening knows he is telling the truth. And most dislike him for it.
Appeasers hate those who confront evil.
Given that this president is the least likely of any president in American history to confront evil — or even identify it — while Benjamin Netanyahu is particularly vocal and eloquent about both identifying and confronting evil, it is inevitable that the former will resent the latter.
The negotiations with Iran over its nuclear weapons program are today’s quintessential example. Those who will not confront a tyranny engaged in terror from Argentina to the Middle East, and which is committed to annihilating another country, will deeply resent Israel and its leader.
For those who doubt the truth of this rule of life, there are plenty of other examples.
Take the Cold War.
Those who lived through it well recall that those who refused to confront communism vilified those who did. Indeed, they vilified anyone who merely labeled communism evil. When President Ronald Reagan declared the Soviet Union an “evil empire,” he was excoriated by those who refused to do so. Yet, if the words “evil” and “empire” have any meaning, they perfectly applied to the Soviet Union.
But to those who opposed Reagan, these words could not be applied to the Soviet Union.
New York Times columnists lambasted the president for using such language. The newspaper’s most prestigious columnist at the time, James Reston, condemned Reagan for his “violent criticism of Russians as an evil society.”
Anthony Lewis accused Reagan of using “simplistic theology.” Reagan was using “a black and white standard to something that is much more complex.”
Tom Wicker wrote that “the greater danger” than the spread of communism “lies in Mr. Reagan’s vision of the superpower relationship as Good versus Evil.”
Columnist Russell Baker added his contempt for Reagan’s characterization of the Soviet Union. And, in a long Times article under the headline, “Reagan’s Gaffe,” an unnamed “strategist” for former Vice-President Walter Mondale told the newspaper that “Mr. Reagan had undercut diplomatic efforts of recent months” — exactly as the Times and the Obama administration now describe Benjamin Netanyahu doing to the negotiations with Iran.
(For a detailed description of the reactions to Ronald Reagan’s anti-communism, see Ann Coulter’s book, “Treason.”)
Some 20 years later, when President George W. Bush characterized the regimes of North Korea, Iraq and Iran as an “Axis of Evil,” he was likewise lampooned — as if those mass murderous tyrannies were not evil.
In short, those who refused to characterize the Soviet Union as evil loathed Ronald Reagan and other anti-communists for doing so; and those who objected to the “Axis of Evil” label placed on North Korea, Iran, and Iraq loathed George W. Bush and his supporters. The loathing of Benjamin Netanyahu is simply the latest example of the rule that those who will not confront evil will instead confront those who do. (It’s much safer, after all.)
Since the end of World War II, there has been a name for the people who refuse to confront evil and who resent those who do: leftists.

Tuesday, February 24, 2015

Chump IRA Historical Dividend Growth Graphic...Very Pretty

I've been messin' with excel's graphing features again... here is the result:

This is a nice visual of the yearly dividend growth.  Each quarter and full year are shown.  The total annual dividend has grown at a rate of over 17% annually since 2011.  I love to see the growth in each quarter, as well as each year, I find this very motivational ;-)

My recent sale of Walmart, and addition of better growers will only enhance this growth in 2015.



More on My GE Purchase Yesterday

Interesting insider activity at GE, from today's SA:


  • It’s always a good idea to keep track of the insider buying activity.
  • General Electric’s director purchased 800,000 shares of the company for nearly $20 million.
  • General Electric’s shares haven’t moved yet.
  • Could this be an opportunity for investors?
Peter Lynch, the iconic hedge fund manager at Fidelity Investments and the author of two of the most widely recognized investment books "One Up On Wall Street" and "Beating The Street", wrote:
Insiders might sell their shares for a number of reasons, but they buy them for only one: they think the price will rise.

Monday, February 23, 2015

Selling Walmart, and a Few Additions

After a long weekend of consideration, I've decided to sell my position in WMT today.  I closed the position with a gain of around 13.5%, over 2.5 years...pretty anemic.  The final straw was their measly $0.01 dividend raise announced last week, coupled with the announcement they are going to pay their employees more money.  I don't mind the increase in wage, but they said it would cost $1B!!  Ouch.   For Costco, who sells higher end products with high margins, they can pay their employees better, but at the worlds's low cost seller, they can't.  Low yield, slow to no growth, no growth in the dividend...I'm better off owning other names, including utilities....

More on the adds soon, started a 1/3 position in GE (3.6%Y), added to DOV(2.1%Y) and SO(4.6%Y).  And I still have some cash left over.

Here are the FASTGraphs:

First GE:

A few comments on GE:
  • I've owned it in my taxable account for over a year...its pulled back some recently, and presents a good value at current prices
  • GE has a yield of 3.7%, and has been on the rise every year since the financial crisis
  • GE is rated AA+ by S&P, and has sold off their financial business making them less risky
  • GE is huge, global, and into so many markets and countries....a great conglomerate for the long haul.
Next is current holding DOV:

A few Dover comments:
  • Dividend Aristocrat, with raises in the dividend for 59 consecutive years!
  • Price has pulled back some recently due to a rare sales and eps reduction in 2014
  • Slightly underweight position in the portfolio, decided to add a small amount here
Next is utility SO:

A few SO comments:
  • I've held Southern in the chump IRA for 2 years or so, very low Beta of 0.16
  • Yield is 4.6%, and on a Price/Cash Flow basis, the stock is a bit under valued
  • Nice safe utility, with good yield and steady slow growth
  • Added a small additional amount to increase the the portfolio income


Thursday, February 12, 2015

Cisco (CSCO) Crushes Expectations

Cisco is hitting on all cylinders...up over 9% today based on solid earnings and revenue.  CSCO is around 3.8% of the Chump portfolio... From Morningstar:

Cisco Systems Inc


Cisco remains a dominant force in data networking.

Analyst Note 02/12/2015
Cisco struck an overwhelmingly positive tone in releasing fiscal second-quarter results, with CEO John Chambers making numerous comments to the effect that the firm has never been better positioned to capitalize on the opportunities ahead of it. Cisco's performance during the quarter was at the high end of management's forecast, with revenue up 7% year over year. The firm expects to continue growing in the third quarter, forecasting revenue up 3%-5% year over year. We don't expect to materially change our fair value estimate, and we continue to believe Cisco is executing well and its competitive position remains strong.
Cisco saw strength across several key markets during the second quarter, including switching (revenue up 11% year over year) and the data center segment (up 40%). Within switching, the Application Centric Infrastructure platform, Cisco's response to software-defined networking, continues to gain adoption, with ACI/Nexus 9000 customers reaching 1,700, roughly tripling over the past two quarters. The service provider market remains the biggest source of weakness, with service provider video sales down 19% year over year and routing sales up only 1%. However, service provider orders were down only 1% versus a year ago, the best result in six quarters. Emerging markets continue to show signs of stability, with orders up 1% year over year. Sales in China and Russia, as should be expected, are still very weak.
Efforts to streamline the company produced solid profitability during the quarter. The gross margin expanded slightly versus a year ago to 61.7%, while the operating margin expanded nearly a percentage point to 28.4%. Head count declined 3% during the quarter, bringing the total reduction to 5% since the end of fiscal 2014. Free cash flow was stable versus a year ago at $2.6 billion during the quarter despite a $1 billion unfavorable swing in working capital resulting primarily from the return to revenue growth.

Below is a 20Year FastGraph for CSCO:

Even at today's price of $29.40, I estimate fair value for CSCO to be around $35, so the stock is still a great value.  I'll continue to hold.


Wednesday, February 4, 2015

AFLAC Results (AFL) - Solid Company, Undervalued

Aflac had a nice Q4 earnings report yesterday, here is a summary:

Aflac is a dividend champion, with a 32 year streak of dividend increases.  I consider it a core position in the Chump portfolio, and plan to hold the position.

Below is a recent FastGraph for AFL which shows where I bought the stock and when:

As the graphic shows, AFL is trading at a significant discount to fair value.  As I write this, the stock is at $60.88.  Fair value per the above is in the range of $95 - $100 per share.

AFL presents a nice buying opportunity today.



Friday, January 23, 2015

Why Am I the Target of Every New Tax? Because I'm "Rich!"

As you've no doubt heard, the President wants to raise taxes....among those mentioned, taxes on your assets and taxes on 529 educational savings plans.  Ay Carumba!  (529 article posted below)

What is really frustrating to me, is the notion, which goes largely unchallenged, that families earning $250k per year are the "rich."  I'm fortunate (perhaps even lucky);  my family income is greater than $250k per year...therefore, I'm rich!  Further, our president is fond of saying that those of us earning over $250k are the "fortunate" and the "lucky."  It's our responsibility to forego tax breaks, pay higher taxes and fees, so that we can transfer our hard earned money to those "less fortunate."  What is it that differentiates the fortunate from the less fortunate?

Is it just our current family income?  Why is income the only measure of the fortunate?  How about someone who comes from a wealthy family, inherits millions, but doesn't choose to work, so has a lower income.  Is that person less fortunate?  How about the many kids I grew up with, all of whom had the same opportunities as me, but chose different paths, perhaps easier paths, and now earn much less than I do?  Are they really less fortunate?  How about an athlete receiving a full ride to college, but who didn't bother to study or get a useful degree, and is now making low wages.  Is that person less fortunate?

I am a non-union professional, and always have been.  I come from a modest background; my father was a middle school counselor, and my mother couldn't work due to chronic illness.  I paid for 100% of my college education.  My first job after college paid me $28.5k per year.  I've worked hard to get to this level of income, and its taken 25 years of long hours and strong job performance. I've never been fired from a job, but I've always been an "at will" employee, with the threat of job loss ever present.  Is that "luck?"  Perhaps.

I don't have a pension awaiting my retirement, I have to build my own pension with a 401k, rollover IRA (the Chump portfolio), and regular savings. I may or may not have social security when I retire in 15 years or so.  The Social Security website places an asterisk next to my benefits, which states that by 2030 (my retirement year), there will only be enough money to fund 77% of projected benefits.  Hmmmm

As someone who enjoys more than $250k in annual income, I also DO NOT qualify for many useful tax benefits and programs including:

  • Can't deduct IRA contributions
  • Don't qualify for a Roth IRA
  • Pay a higher federal tax rate on earnings
  • Don't qualify for any college financial aid
  • Can't deduct 529 contributions from state tax
  • and many, many more
Is $250k really indicative of a "rich" person?  In my family, after federal and California state taxes, $250k becomes $162k.  A mortgage in CA, or a rental for that matter, is around $3k/month, or $36,000.  And when you add in property taxes and outrageous prices for gas, electricity and water, mello roos and hoa fees, etc...housing consumes around $50k per year.  That leaves $112k.

Food, gas, home insurance, life insurance, car insurance, autos, clothing, healthcare, cell phones, cable, and other expenses for a family of five eat up around $50k per year, taking me down to $62k for non-essentials.  Among the non-essentials are things like vacations ($10k), the kids sports and hobbies ($12k).  Another frustrating non-essential cost is education.  The public schools in California are among the worst in the country, thus, we pay for supplemental tutoring for our 2 younger kids ($5k), and are likely to try and send them to a private high school ($13k/year).  My oldest is a freshmen in a California public a cost of $34,000/year.  Ignoring private high school for the moment (I have a year before it hits, whew!), I'm left with....drumroll....$1,000.  That's right, after all of the above, I would have $1,000 left!

Oh, and let's not forget about retirement.  I need to send money to my 401k for retirement, into a 529 account for three kids college, where I'll need to pay 100% of their education, and I have to find some savings for our regular (taxable!) savings & investment account for emergencies and rainy day!

Could I spend less?  Of course, and we do.  We can take fewer and cheaper vacations, we can drive older cars (we do) that are 100% paid for.  We can eat out less, buy new clothing less frequently, and cut back on sports and hobbies.  We could even sell our modest 2,600 square foot home and find a smaller one.

But I ask you, is this what "rich" families do?  

Thank goodness I've been socking away a few bucks from every paycheck into my 529 account.  I now have enough saved to pay for my son's four years of public university, and I'm on track to have enough for my two daughters when they hit college ages.

I definitely consider myself rich, but its because I have an incredible family, some great friends, and we're blessed with good health, not because of my income.



Push to Tax ‘529’ Plans Stokes Debate

Obama Touts Proposal as Means to Restructure Student Aid, but Critics See Challenges for Middle Class

President Barack Obama ’s push to start taxing college-saving accounts, including the popular “529” accounts, would affect millions of Americans who are stashing money for their children’s education, stirring debate about how to structure federal student aid and how to define the middle class.
The proposal, which has sparked a public backlash but faces dim prospects in Congress, targets so-called 529 savings accounts that boomed after Congress passed the tax breaks starting in 2001. States have promoted the plans as a way for middle-class parents to combat escalating college costs.
The president’s push, unveiled as part of a broader tax overhaul last weekend, would strip the main federal tax benefit from the plans by taxing any money earned from future contributions. Currently, earnings aren’t taxed and the White House says existing funds would be shielded from the new tax.
Administration officials say the changes are part of a move to restructure a slew of education tax benefits that, according to the College Board, amounted to $17.4 billion in 2012. The net effect would be to boost aid for low- and middle-income families while removing benefits currently enjoyed by wealthier families, the White House said.
The president’s proposal, which has critics within his own party, has generated concern among middle-income families who say they prefer the current system.
Elizabeth Philips, a single mother in San Diego, opened a 529 plan last year for her two boys, ages 6 and 9. She said that without more details, she is skeptical.
“I think we should be making it easier for parents to get started with 529s and not add any more roadblocks,” said Ms. Philips, who said she earns six figures but under $150,000 as a marketing professional at a technology company. At time of rising college costs, she said, “the No. 1 thing people should be doing is setting up these accounts as early as possible to maximize the time value of money.”
To buttress its case in the context of a sharpened focus on the middle class, the White House points out that around 70% of funds in 529 accounts and lesser-known Coverdell plans—which would also be affected—belong to households earning more than $200,000 a year. Thus the benefit of the tax break skews heavily toward the highest earners.
While the president’s push to eliminate tax breaks on ‘529’ college-saving plans isn’t likely to clear Congress, it has sparked debate over how to structure student aid and how to define the middle class. Here, the University of Mississippi campus in Oxford.ENLARGE
While the president’s push to eliminate tax breaks on ‘529’ college-saving plans isn’t likely to clear Congress, it has sparked debate over how to structure student aid and how to define the middle class. Here, the University of Mississippi campus in Oxford. PHOTO: ASSOCIATED PRESS
Chye-Ching Huang, senior tax policy analyst at left-leaning Center on Budget and Policy Priorities, said the president’s plan is sound. “Overall, the plan would scale back benefits that primarily benefit students from high-income families and would attain college anyway without those tax subsidies, and redirect it more towards people who actually need help for college and more likely to react to incentives,” Ms. Huang said.
Slightly over half of all the college-saving accounts are held by Americans making under $150,000 a year, according to a 2012 Government Accountability Office report. About 30% earned under $100,000 a year. There are about 12 million 529 accounts in total, according to the College Savings Plan Network, an industry group, while the average balance in a 529 account is about $21,000—enough to cover almost two years average tuition, room and board—minus aid—at a public four-year university.
Ryan Ellis, tax policy director for the conservative think tank Americans for Tax Reform, said the proposal violates an Obama campaign pledge to not raise taxes on middle-income Americans.
“This idea that this is an account for the preserve of the Huxtables out there that make $250,000 a year is kind of ridiculous,” Mr. Ellis said. Many owners of 529 plans are young parents who take pride in saving money in advance for their children’s college education, he said. “You’ve made them look like chumps for saving whatever they’ve saved so far.”
Other critics, including Capitol Hill Republicans and conservative think tanks, said the president’s plan of “streamlining” education tax benefits was vague and that removing the 529 tax break would ultimately hurt middle-income families. The change, critics say, would dissuade parents from saving and ultimately push more families to borrow for educations at a time when student debt burdening many middle-class Americans.
“What these accounts are designed for is the middle-income families that can’t afford to pay as you go and aren’t going to get need-based aid,” said Betty Lochner, head of the College Savings Plan Network. “It doesn’t make any sense to” take away the incentive to save, she said. Ultimately, many families would have to borrow more to cover expenses without the 529 tax break, she said.
The White House said 529 plans would continue to receive “favorable” tax treatment even with the proposed change. The accounts would still grow tax-free, with funds being taxed only after being withdrawn. Also, the earnings would be taxed as income to the beneficiary—the student. Officials pointed out that in most cases students are in lower income brackets than their parents and thus pay a lower tax rate.
The 529 provision was pitched as part of a broader tax overhaul, which faces steep odds on Capitol Hill. Sen. Lamar Alexander (R., Tenn.), chairman of the committee that oversees education policy, said the 529 provision is “sure to go nowhere in Congress.”
But the larger restructuring, were it to pass Congress, would make the system fairer, the White House said.
“Under the president’s plan, every dollar saved from consolidating and curbing inefficient education tax breaks—and tens of billions more—is ploughed right back into higher-education tax benefits for students and middle-class families,” an Obama administration official said.
The vast majority of middle-income families who would lose the tax break for 529 earnings would benefit from an expansion of the American Opportunity Tax Credit under the president’s plan, the official said.
Write to Josh Mitchell at

Tuesday, January 20, 2015

WBA and Update to my Rules for the Portfolio

WAG is now WBA post the Walgreen's Boots-Alliance merger.  It took a few days, but FASTGraphs now tracks the WBA symbol, so I can see how WBA is valued.  On my previous post I left WBA valuation as TBD.  Below is the FASTGraph for WBA:

Previously, I listed all the Chump holdings and whether the stock was "Core" to the portfolio.  WBA is a core holding for now with a great dividend growth streak of 39 years.  I'll continue to watch the integration of Alliance Boots, but plan to hold this stock for awhile.  

That said, WBA has reached a dangerous level of overvaluation.  I trimmed the stock some right near year end (reduced my holding by 20%), and now I'm going to turn off automatic dividend reinvestment.

In fact, I'm instituting a few new rules to the portfolio:
  1. Decide whether a holding is core or not.  Core tend to be dividend growth Champions, have very high quality financials and performance, and an excellent track record over decades. (This rule is not new)
  2. When a core or non-core position gets overvalued, say 20% - 50%, then turn off dividend reinvestment, and have the dividends go to cash for investment elsewhere in the portfolio
  3. When a core position gets dangerously overvalued (greater than 50%), then trim it back to a full position
  4. If a non-core position gets dangerously overvalued (greater than 50%), then sell it completely, and find a good replacement with a better valuation and dividend.
With these new rules in play, I've turned off dividend reinvestment to MO, GD, and WBA.


Wednesday, January 14, 2015

2014 Year End Holdings, Performance, and Valuation

Here are the Chump holdings from year end 2014, and my estimates of valuation based on prices from the 1st week of January....

32 positions, full position size is just a bit over 3% at the current portfolio value.  A few other comments here:
  • 3/32 pay 5% or more
  • 8/32 pay 4% or more in yield
  • 2/32 pay 3% or more
  • 12/32 pay 2% or more
  • 7/32 pay 0.8% or more
  • Total current yield of the portfolio is 2.92%
  • I've identified 14/32 holdings as "core," and would like to hold these forever, even when overvalued (though I may trim these occasionally)
  • Will add to three core positions due to undervaluation...T, EMR, DOV
  • Apple is largest holding, at nearly a 2x size position, but won't sell until it becomes overvalued
  • I'm going to invest the $12k in cash asap, and try to beat the S&P 500 this year.
  • BBL and TUP have been my biggest losers....holding both for now.
  • HAL has given back a 100% gain and sits close to my original purchase price...ouch
Finished the year at 12.48% total return, vs. S&P 500 return of around 13.7%.  Not bad, but not good enough.



Started a Position in UTX today.....

Limit order filled at $113.25.  1/3 full position.  Dividend contender, 21 straight years of dividend at fair value.  Nice opportunity to add a high quality industrial stock...  more to come.


Monday, January 12, 2015

2014 Full Year Results - Dividends

I've calculated my full year dividends received, and here are the results:

I really started my dividend growth, 100% individual stock allocation in 2012, and had the portfolio established on 7/1/2012.  No new money enters this account, only dividend reinvestment.

Since that date, the portfolio has grown in total value from $385,923 to $588,760 at year end 2014.

My dividend income grew over 25% year over year.  That's very cool.  If I can keep up 20% dividend growth, probably tough, but I'll try, the spreadsheet below shows where my income will be in 13 years.....and if I can keep outperforming the 20% target, I can get that income a few years sooner, and enable an earlier retirement.

To do this, I've got to examine the portfolio for dividend "laggards," companies that didn't sufficiently raise the dividend, and replace them with better actors.  I'll be conducting this analysis in the coming days/weeks.



CSX and Diesel Prices

Nice article about CSX today in the WSJ....shown below.  The Chump IRA has a full position+ in CSX, around 3.6% of the portfolio.  It looks like falling oil prices are a boon to CSX's earnings.

Cheaper Fuel Works on CSX Railroad

Surcharges Give Railroad Operator Some Pep

CSX’s December per-mile fuel surcharge was based on October diesel prices that were $3.68 a gallon. The actual average price was $3.41 and now hovers right above $3.00. ENLARGE
CSX’s December per-mile fuel surcharge was based on October diesel prices that were $3.68 a gallon. The actual average price was $3.41 and now hovers right above $3.00. ASSOCIATED PRESS
Like trains themselves—which can take a mile to stop and can’t swerve—railroad operators aren’t very nimble.
But that drawback may result in an unexpected bonanza for the likes of CSX Corp. It will be the first big U.S. railroad to report results for the latest quarter Tuesday and may overshoot. Analysts think it earned 49 cents in the fourth quarter, up from 42 cents a year earlier. Their expectations have risen by just one cent since June when oil prices started their tumble, though.
Some observers have looked at the oil-price situation in a glass-half-empty fashion: The shale boom has overwhelmed pipeline capacity and led to a surge in crude shipped by rail. That has provided a profit boost to outweigh the slump in coal use, a vital freight category for U.S. railroads.
But CSX is among the least dependent on oil shipments and, in any case, there was no evidence of a slowdown in volume recently. While that may change, the overall freight picture looks strong. Nationally, the Association of American Railroads reported that large carriers shipped a little over 4.1 million carloads in the last three months of 2014, an increase of 5.1% year over year.
The other impact of oil’s price slump may be more immediate and beneficial: Railroads, like truckers and parcel services, add fuel surcharges to their fees. In the case of railroads, though, they are based on retail diesel prices with a lag. A rapid drop in prices should cut the railroads’ actual fuel cost immediately and creates a temporary windfall.
December’s per-mile surcharge at CSX, for example, was based on October diesel prices that were $3.68 a gallon. The actual average price was $3.41 and now hovers right above $3.00. The same benefit will be inconsequential for trucking firms like YRC WorldwideInc. that have much shorter lags in adjusting fuel surcharges.
The boost for operators like CSX will be fleeting, but a pleasant surprise and a reaffirmation of upbeat earnings guidance for 2015 could augment the stock’s recent momentum. Despite the fact CSX now trades on a forward-earnings multiple that is at a 15% premium to its average of the past decade, it may be too early to tap the brakes.
Write to Spencer Jakab at