Started a Position in UTX today.....

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

Chump

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.

Best,

Chump

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.

AHEAD OF THE TAPE

Cheaper Fuel Works on CSX Railroad

Surcharges Give Railroad Operator Some Pep

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

By 

SPENCER JAKAB

Jan. 12, 2015 4:52 p.m. ET

0 COMMENTS

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.

ENLARGE

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.

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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 spencer.jakab@wsj.com

Happy New Year! 2015 (and the Case for God)

Happy New Year to anyone reading the Chump blog....  I just got back from a nice long vacation and a terrible cold.  I'll be posting some articles on 2014 portfolio performance vs. the S&P, income growth in 2014, things I learned in 2014, and what I'll do to improve in 2015.   I need to wait a few weeks for my Fidelity brokerage to post several full year metrics, including my dividends received in Q4.  Until then, here is a great article about God from the Wall Street Journal on Christmas Day.....enjoy!

HOUSES OF WORSHIP

Science Increasingly Makes the Case for God

The odds of life existing on another planet grow ever longer. Intelligent design, anyone?

ENLARGE

CORBIS

By

ERIC METAXAS

Dec. 25, 2014 4:56 p.m. ET

4939 COMMENTS

In 1966 Time magazine ran a cover story asking: Is God Dead? Many have accepted the cultural narrative that he’s obsolete—that as science progresses, there is less need for a “God” to explain the universe. Yet it turns out that the rumors of God’s death were premature. More amazing is that the relatively recent case for his existence comes from a surprising place—science itself.

Here’s the story: The same year Time featured the now-famous headline, the astronomer Carl Sagan announced that there were two important criteria for a planet to support life: The right kind of star, and a planet the right distance from that star. Given the roughly octillion—1 followed by 27 zeros—planets in the universe, there should have been about septillion—1 followed by 24 zeros—planets capable of supporting life.

With such spectacular odds, the Search for Extraterrestrial Intelligence, a large, expensive collection of private and publicly funded projects launched in the 1960s, was sure to turn up something soon. Scientists listened with a vast radio telescopic network for signals that resembled coded intelligence and were not merely random. But as years passed, the silence from the rest of the universe was deafening. Congress defunded SETI in 1993, but the search continues with private funds. As of 2014, researches have discovered precisely bubkis—0 followed by nothing.

What happened? As our knowledge of the universe increased, it became clear that there were far more factors necessary for life than Sagan supposed. His two parameters grew to 10 and then 20 and then 50, and so the number of potentially life-supporting planets decreased accordingly. The number dropped to a few thousand planets and kept on plummeting.

Even SETI proponents acknowledged the problem. Peter Schenkel wrote in a 2006 piece for Skeptical Inquirer magazine: “In light of new findings and insights, it seems appropriate to put excessive euphoria to rest . . . . We should quietly admit that the early estimates . . . may no longer be tenable.”

As factors continued to be discovered, the number of possible planets hit zero, and kept going. In other words, the odds turned against any planet in the universe supporting life, including this one. Probability said that even we shouldn’t be here.

Today there are more than 200 known parameters necessary for a planet to support life—every single one of which must be perfectly met, or the whole thing falls apart. Without a massive planet like Jupiter nearby, whose gravity will draw away asteroids, a thousand times as many would hit Earth’s surface. The odds against life in the universe are simply astonishing.

Yet here we are, not only existing, but talking about existing. What can account for it? Can every one of those many parameters have been perfect by accident? At what point is it fair to admit that science suggests that we cannot be the result of random forces? Doesn’t assuming that an intelligence created these perfect conditions require far less faith than believing that a life-sustaining Earth just happened to beat the inconceivable odds to come into being?

There’s more. The fine-tuning necessary for life to exist on a planet is nothing compared with the fine-tuning required for the universe to exist at all. For example, astrophysicists now know that the values of the four fundamental forces—gravity, the electromagnetic force, and the “strong” and “weak” nuclear forces—were determined less than one millionth of a second after the big bang. Alter any one value and the universe could not exist. For instance, if the ratio between the nuclear strong force and the electromagnetic force had been off by the tiniest fraction of the tiniest fraction—by even one part in 100,000,000,000,000,000—then no stars could have ever formed at all. Feel free to gulp.

Multiply that single parameter by all the other necessary conditions, and the odds against the universe existing are so heart-stoppingly astronomical that the notion that it all “just happened” defies common sense. It would be like tossing a coin and having it come up heads 10 quintillion times in a row. Really?

Fred Hoyle, the astronomer who coined the term “big bang,” said that his atheism was “greatly shaken” at these developments. He later wrote that “a common-sense interpretation of the facts suggests that a super-intellect has monkeyed with the physics, as well as with chemistry and biology . . . . The numbers one calculates from the facts seem to me so overwhelming as to put this conclusion almost beyond question.”

Theoretical physicist Paul Davies has said that “the appearance of design is overwhelming” and Oxford professor Dr. John Lennox has said “the more we get to know about our universe, the more the hypothesis that there is a Creator . . . gains in credibility as the best explanation of why we are here.”

The greatest miracle of all time, without any close seconds, is the universe. It is the miracle of all miracles, one that ineluctably points with the combined brightness of every star to something—or Someone—beyond itself.

Mr. Metaxas is the author, most recently, of “Miracles: What They Are, Why They Happen, and How They Can Change Your Life” ( Dutton Adult, 2014).

VMI vs. ALK - 2 Months Later

Two months back, September 23, I blogged that I would swap my VMI position for a position in Alaska Airlines, ALK.

Here is the blog link:  http://chumpmenudo.blogspot.com/2014/09/stock-swap-today-vmi-alk.html

Both were paying the same dividend yield (1.1%), but I really like ALK's growth prospects vs. the headwinds that VMI was facing.

2 months later, here is the result:

• VMI closed today at $136.42, up 1.9% since 9/23/14
• ALK closed today at $54.50, up 23.6% since 9/23/14

When I sold VMI, I took a loss on the investment.  But holding a stock that's down, and waiting for it to come back, is foolish if there is a better investment available, as this example shows.  This is why its important to keep track of your portfolio, constantly looking at valuation and growth prospects, and to run screens, always on the lookout for better investments, or upgrades to existing holdings.

A full position in the portfolio is around $18, 000.  I established my ALK position with a 2/3 investment at around $45, then added another 1/3 when the stock dropped to around $41.  My total cost for a full position sits at $43.85.  My return so far is 24.3%.

• Holding VMI, my position would have grown $342
• My ALK investment has grown $4,374

Best,

Chump

A Look at the Portfolio - November 14, 2014 Update

The Chump IRA finished this week, week 45 of 52, up 1.2%.  The past four weeks have seen nice, slow growth:

3.30%

2.02%

1.00%

1.20%

Comparing the portfolio to the S&P 500 Index, Chump has edged back into the lead for YTD performance.  Here is a graphic of weekly performance, which I started tracking in week 27:

For the year to date, the Chump IRA up 13.01% vs. 12.33% for the S&P 500.  Not a bad year so far.  It seems the Chump IRA declines a bit less than the broader market, rises a bit less sharply, though no clear predictable pattern is evident.  

Here are a few thoughts at random:

• The Chump IRA always has a little cash;  the S&P Index does not.  Therefore, I would expect a slight damping effect when comparing the two.
• It's hard to beat the S&P 500 over any period.  I keep thinking that a portfolio of a few Vanguard ETFs might be the best strategy for those not into stock research.  
• My ideal ETF portfolio would be:

• VOO (S&P 500 Index)
• VO (Mid Cap Index)
• VB (Small Cap Index)
• VIG (Dividend Appreciation Index)
• VWO (Emerging Market Index)
• VNQ (REIT Index)

• I own these in my taxable account, and some other accounts that I manage.  This group of ETFs is pretty tough to beat.  All are very low cost, and not actively managed.
• One thing I really like about the Chump IRA though, is the growing dividends....they just keep growing every year by 15%-20% in total, which creates a very nice compounding effect.
• I need to keep tweaking my strategy to see if I can get some more alpha!
• I'm going to tweak my strategy to be a bit more active selling overvalued holdings and replacing them with undervalued holdings.
• I'm also going to look for a little more growth in my new adds......the portfolio should only contain fast growers and high yielders.  It should not contain slow growers with low yields......I need to analyze the holdings, and weed these out....

Here is an analysis of the Chump stock holdings, not including my high yielders.  I've screened the stocks for today's PE vs. the "normal" PE for the past 6 years.  If the PE today is over 15, and greater than the "normal," it gets a red box.  I've also boxed low yields below 2%, and low growth rates below 7%.  Here is the result:

Using FASTGraphs, it turns out that EYE ratio, earnings yield estimate, is a good proxy for overall attractiveness of a stock.  All of the stocks with an EYE ratio of 3.5 or lower have two or more red boxes.  I was surprised to see the low yield on BBL, was the dividend recently cut?  I need to check.**  Regarding the others, here are a few thoughts:

• I bought MCD slowly, and its never been at an attractive valuation.  My total gain on MCD over the past couple of years is a mere 5.54%.  Weak.
• I bought WMT, like MCD, for its stellar history, but its never been a great value.  My total return on WMT since purchase is 12.02%.  Better than MCD, but still weak, and 4% came in the past week....
• MDT has been a great stock for the portfolio....it's up 74% since purchase, and is getting a little overvalued.  I've trimmed it several times these past two years.
• GD is another great performer, now a bit overvalued, with a total gain since purchase of over 115%.  I've trimmed this holding, but may need to again.
• JNJ is up 59% since purchase, and may need to be trimmed.
• KO is another that I added for reputation and moat, but has never been undervalued.  My total return since purchase is a weak 11%.

Need to give this some thought.

Here is a screen of my high yield, low growth stocks, screened by cash from operations (instead of earnings).  As long as the yields stay above 4%, and they continue to raise the dividend, which might become a problem for SO and PM, I'll continue to hold these:

That's all for now,

Chump

**Note:  BBL yield is actually 4.6%...FASTGraph had it as half of that....I'll continue to hold BBL

Chump

HAL rumored to be in talks with BHI (Baker Hughes)

From today's WSJ.....HAL is a large position in the portfolio, and it trading at a nice discount to fair value....

BUSINESS

Halliburton in Talks to Buy Baker Hughes
Talks Moving Quickly Between Rival Providers of Oilfield Services

The deal would be one of the largest energy deals in recent years and comes as the industry is grappling with a sharp decline in oil prices.

The deal would be one of the largest energy deals in recent years and comes as the industry is grappling with a sharp decline in oil prices.

Halliburton Co. is in talks to buy Baker Hughes Inc., according to people familiar with the matter.

Talks between the two oil-field-services companies are moving quickly, and they could reach an agreement soon, said two of the people.

The price being discussed couldn't be learned, but a deal for Baker Hughes would likely come at a premium to the Houston company’s market capitalization, which was $21.6 billion as of Thursday afternoon. Halliburton had a market value of $45.2 billion.

Shares of Baker Hughes, which were halted for a while, jumped 15% following the news to $58.75, while Halliburton shares added 1% to $53.79.

A deal of this size would be one of the largest energy deals in recent years and comes as the industry is grappling with a sharp decline in oil prices.

Baker Hughes was formed in 1987 when Baker International and Hughes Tools Co. came together. The company has more than 60,000 employees, according to its website.

Oil-field services companies help energy producers find and extract hydrocarbons. They have had to deal with a glut of natural-gas supply in recent years that caused oil prices to plunge and pushed energy companies to shift operations to oil-rich shale, which is harder to tap.

—Ryan Dezember contributed to this article.