Wrapping Up a Successful 1st Quarter in the Blended Income Portfolio

Again we are more than pleased with our portfolio’s performance (the 2015 Model Porfolio – Blended Income) during the 1st quarter ending 3/31/2015.  Against our annualized goal of 7% we posted a 2.40% gain (even with about a 1/2% penalty for brokerage fees and a lag of a month in dividend flows as we did not own the shares during December, 2014 when many shares would have went ex-dividend). If we wanted to I guess we could say we had a non-gaap gain of 2.90% and then added footnotes–then we could report like damned near every corporation in this country reports now.  Nope, the gain was 2.40%–plain and simple.

As this quarter began we were thinking that we would need to be a bit overloaded in common stocks and REITs to have a chance of making our goal. The thought being that we may well lose money on preferred stock and even baby bonds–obviously this has not been the case.  When rates move higher is anyones guess (yes we think that the FED will raise short rates, but we don’t know how this will translate to longer term rates). It seems like one can be wrong in many assumptions, but if diversified in the right sectors, still have reasonably good results.

Looking over the portfolio we can see the star performer of all preferred stocks was the new issue CHS 7.50% preferred (ticker:CHSCL) that we picked up for $25.15 and it is near $28–over a $1000 gain.  All other preferreds–including term preferreds performed as well as we expected–acually a bit better as they almost all have small gains and we would have been happy with flat performance and dividends–oh well we will take the gains.

The baby bond category all performed well. Almost all small capital gains with just 1 star performer and that was Star Bulk Carriers 8% notes (ticker:SBLKL)which more through luck, than skill, was bought during a down draft and it has popped by up fairly well.

In the REIT area the star was Hannon Armstrong (ticker:HASI) in which we ‘harvested’ profits this week. Additionally, newer triple net REIT Store Capital (ticker:STOR) performed quite well. Store Capital is a mini Realty Income.

Our Canadian shares performed ok– but honestly the U.S. price does not reflect solid performance from many Canadian companies as the strength of the dollars has cut into U.S. share prices.  Our favorite Leisureworld Senior Care (ticker:LWSCF) has had great financial performance yet the U.S. shares are trading flat while the Canadian shares are up over 20%.  This too shall change and when it does we shall reap the benefit for a weakened dollar.

Our common shares were total crap. Chosen to hopefully catch any updraft in the overall market we succeeded in losing money in 7 of 8 issues–just 1 more and we would be batting 1000. As a group we lost around $4500 in these 8. It is amazing that we had a 2.40% gain with this type of performance. Fortunately at a 14% weighting our gains overwhelmed these losses.  Obviously we have to re-evaluate this segment as the stock market seems awfully weak and we are thinking we might have to lighten up a bit here.

The particular MLP’s we owned performed extraordinarily well. Given that we owned only 3 issues to have 2 home runs is way beyond expectations. Both variable rate MLPs CVR Refining (ticker:CVRR) and Alliance Bernstein (ticker:AB) simply kicked butt.  Both issues up over 20% in the quarter and we harvested profits in CVRR this week.  These issues not only are variable rate—but share prices can be quite volatile so harvesting at a high is prudent, but we will look to re-enter in the months ahead.

A victory in the quarter for us was that we did not do much buying or selling until right at the end of the quarter when we harvested the above mentioned profits.  We tend to have a itchy trigger finger on the buy/sell button and we have tried hard to fix that personal tendency since seldom are we correct anyway.

We planned to redeploy some of the cash from our harvest last week into a couple of issues, but simply didn’t get the time to get it done.  Cash stands at 12% so we will be looking to do some buying this coming week.  To maintain progress on goal we need to have a minimum gain of 1.1% for the 2nd quarter–on the face of it we would think quite doable. On the other hand we know how fast markets can reverse and instantly vaporize all of your profits.