Friday, April 28, 2017

Reflecting on my MCD Sale in December of 2015

I closed my position in MCD back in December of 2015.  The blog I posted at the time can be found here:  or in the archives on the right side of this page.

Every time I look at my stock holdings and my watch list, I see MCD making new highs, which causes me some angst.  This past February, after reading a book by Michael Lewis, I wrote an article about selling stocks (here: and how regret is such a strong emotion for investors, and how it can keep us from making smart investment decisions.

Should I regret selling MCD back in late 2015?  The quick and easy answer is yes, I sold it at around $118, and today it's trading above $140, what a Chump I am!

But wait, if you look more deeply at the decision, which would be impossible to do without a diary, log, or in my case, a blog, the story changes.  Going back to my blog post from December 2015, I was concerned about the valuation of MCD.  Looking at the FASTGraph for MCD from that time, I was right to be a little worried:

The price and PE had become disjointed from their earnings.  In short, MCD was becoming a risky hold, and in my opinion, was likely to revert to a more normal historical PE in the coming year, from the then current PE 24 down to a more normal PE 19.

However, because I dislike selling quality stocks, I was inclined to hold on to MCD and continue to collect the dividend, unless I could identify a more attractive alternative.  The fear of regret was holding my back!  I was imagining selling MCD, then watching it go to $140!

At about this same time, I was reviewing my watch list favorable alternatives.   I had read a good article by Brad Thomas, actually several, touting the virtues of a REIT called Stag Industrial, so it was on my watch list.  (As an interesting aside, I noticed Brad has written about STAG 32 times on SA.  The only REITs with more coverage from Brad are O and VER)  After doing some research, I determined that I would shift by investment from MCD to STAG.  Here is the FASTGraph for STAG at the time:

STAG was trading below its normal P/FFO ratio, was paying a 7.4% yield, and seemed a good value with a reasonable margin of safety, so I made the swap.

So while my initial reaction was to regret my sale of MCD, if I look at where the proceeds from that sale were invested, do I still feel regret?  Here is an accounting of the Swap:

These are just close approximations, not a perfect accounting, but it's clear that I made a pretty good decision, at least as of today, and I can have a lot less regret over the sale of my MCD holdings.

To summarize my thoughts:
  • I still struggle to trim or sell good stocks when their valuations get too high.
  • However, if the price of a holding gets disjointed from earnings, I believe trimming, or selling is prudent to de-risk the portfolio and protect against inevitable corrections.
  • Especially if I can find an alternative on my watch list of sufficient quality with a more attractive valuation, dividend, and margin of safety.
  • And I can't simple consider how much money I "lost" selling a rising stock, I have to consider where the proceeds were redeployed.

And perhaps most importantly, I've learned that keeping both an historical record of my trades, and an up to date watch/wish list of quality stocks is really important to my investment success.  My swap above would have been difficult without the latter, and this article, and a reminder of why I made the sale, would have been difficult without the former!

Thursday, April 27, 2017

Really Nice Ryan Leaf "Letter to Self"

From The Players Tribune:

Nice perspective.


Continuing to Add KIMCO Realty Trust (KIM). Also added some SPG

Down 5% since I started my position, now trading around $21/share.  5.1% yield, undervalued with nice steady growth projected.

FastGraph here:

Nice low P/FFO multiple, solid balance sheet and credit rating, I like this stock.  Don't love the sector, retail shopping malls, but that is why this stock is underpriced.  Recent bad news for brick and mortar retailers (Sears, JCPenney, etc...) has this segment underpriced.  But KIM focuses only on the very high end of this sector, and is much more insulated from the internet threat.

Another name I like here is Simon Property Group, SPG.  I added a 1/3 position in this stock yesterday for the same reasons....



Tuesday, April 18, 2017

Good Article from Dennis Prager

If you prize clarity, then these past weeks were some of the best in memory.
1. When America leads, the world is better.
For the first time in eight years, the allies of America and the world’s decent people celebrated America’s return to leadership. Just about all of them understand that if the United States doesn’t exercise its power, the worst regimes on Earth will.
The left claims to care about the downtrodden of the world, but this concern is a moral fraud. The downtrodden the left most care about are American blacks, women and gays. And Palestinians. But these groups aren’t downtrodden; they are merely a vehicle by which the left attacks America and Israel to gain power. The truly downtrodden — that is, the most oppressed people in the world, such as Christians living in the Middle East, and the victims of Syrian President Bashar Assad’s tyranny — know who really cares about them: Trump and America’s conservatives.
2. The terrible presidency of Barack Obama is beginning to be acknowledged.
Following President Trump’s order to attack Syria about 63 hours after the Syrian regime seemingly used chemical weapons, even many in the mainstream media couldn’t help but contrast his prompt response with Obama’s nonresponse to Assad’s use of chemical weapons in 2013. And almost every report further noted that Obama failed to do anything after having promised that he would regard the use of chemical weapons by Assad as crossing a “red line.”
Likewise, Obama’s do-nothing policies vis-a-vis North Korea are being contrasted with Trump’s warnings to leader Kim Jung Un about further testing of intercontinental ballistic missiles and pressure on China’s leaders to rein in the North Korean regime.
These contrasts are important for a number of reasons, not the least of which being there is now hope that Obama’s star will dim as time goes on.
This will come as somewhat of a surprise to those on the left, but many of us who are not on the left believe that Obama did more damage to America than any previous president — economically, militarily and socially.
Regarding the social damage, as the first black president in American history, he could have been an unprecedented force for racial healing but instead left America more racially divided than any modern president. In his repeated citing of Ferguson, for example, he helped spread the lie that a racist white Missouri police officer had killed an innocent black teenager without reason (other than racial bias).
He deceived the American people (the “if you like your doctor, you can keep your doctor” assertion and more) in order to pass Obamacare, one of the largest government-expanding programs in American history. He used presidential power in an unprecedentedly authoritarian manner. He showed far more understanding of the Iranian theocracy than of the Israeli democracy. His Internal Revenue Service and Department of Justice were politicized in ways reminiscent of corrupt Third World regimes. And he left America fighting a (thus far nonviolent) second Civil War.
3. The interminably repeated left-wing lie that Trump and Russian President Vladimir Putin are in cahoots has exploded. With Trump’s military attack on Assad and verbal attacks on Russia, that claim has been shown to be what those with a little common sense knew it to be: a baseless, wholly made-up conspiracy theory meant to explain an election loss with which Democrats still haven’t come to grips. In fact, President Trump has shown more backbone with Russia in his first 100 days in office than President Obama did in eight years.
4. Another charge made over and over by the left — the mainstream media, academia and the Democratic Party — that the Trump election had unleashed an unprecedented amount of anti-Semitism was proven to be yet another left-wing hysteria based on a left-wing lie. It turned out that bomb threats phoned into Jewish community centers and Jewish agencies came not from Trump supporters and “white supremacists” but from a black radical and a disturbed young American Jew living in Israel.
Given that factual and moral clarity are conservatism’s greatest allies, we may be witnessing the beginning of a conservative Renaissance, the likes of which we haven’t seen since the advent of progressivism.

This column was originally posted on