Hi, fellow reader, appreciate you stopping by.
In this post I want to give you an overview on our investments we have made so far during the year.
2017 Stock acquisitions
My family and I had a great time this summer, travelling and looking for interesting projects. And of course we have been shaping our finances even further. In July we were able to boost our monthly savings rate above 70 %, for the year our rate now stands at 65 % (my fellow blogger Mustachian Post runs a very inspiring Blogger Savings Rate Index (BSRI), check it out!).
We are pretty happy with our achievements in terms of streamlining our financials and increasing our household’s profitability. This gives us tremendous flexibility and allows us to put more and more money to work for us.
In 2017, we have invested the amount of around USD 22’000 in following businesses (have also a look at our 2016 Stock acquisitions):
- The J.M Smucker Company
- Imperial Brands
- Bayerische Motoren Werke AG (BMW)
- Henkel AG & Ko
- Reckit Benkisser
I expect these six companies to provide at least USD 500 in dividends in 2018 and that amount to incrase quite nicely over time. For next year, I target a passive income of around USD 6’000.
Giving my Portfolio a more defensive shape
I’ve covered my acquisitions of stocks of Heineken, The J.M. Smucker Company and Imperial Brands in previous blogposts (see J.M. Smucker caught my attention, A refreshing Investment and my June Dividend Report).
As you can see from the acquisition list, I set a strong focus on consumer staples.
Don’t get me wrong. I am fine with my energy and resource stocks such as Royal Dutch Shell, ExxonMobil, Chevron, Rio Tinto, BHP Billiton. I also appreciate my bank investments such as HSBC, UBS, Banco Santander, LLB, VPB. These are all fine businesses providing me with strong dividends, just take Royal Dutch Shell and HSBC for instance providing me with Yield on Costs (YoC) of almost 10 %.
However I consider consumer staples and pharma companies as the backbone of my portfolio.
Holding rather “boring” businesses such as Nestlé, Novartis and Roche taught me the power of consistently growing dividends. After 7 years, YoC of these holdings lie between 4 % and 5 %. These businesses give my portfolio stability and reliable growth. In my view, even slowing (dividend) growth is nothing to prevent long term investors of being rewarded handsomely. Defensive companies offer the possibility to engage in some of quite rare enterprises with strong balance sheets and business models being able to retain customers during economic downturns without having to make price concessions. I see consumer staple companies in particular as businesses with a low risk of getting harmed by a recession.
Now, let’s have a look at my investments in BMW, Henkel and Reckit Benkisser.
German car-maker BMW looks attractive to me
Just to be very clear:
CONSIDERING OURSELVES AS MUSTACHIANS WITH A DOWN TO EARTH LIFESTYLE, WE WOULD NOT BUY A PREMIUM CAR.
We are very happy with our beautiful red Mazda 6 Skyactiv-G 165 Ambition. I bought that model as a demonstration car for a very attractive price in 2016. Our car is a spacious combi and perfectly fine for our family of four. Running costs are pretty low for a car of that size.
BUT AS AN INVESTOR, I TAKE ANOTHER PERSPECTIVE. THE PREMIUM CAR SEGMENT OFFERS WIDER PROFIT MARGINS.
When acquiring a piece of a business, I want profitability, stability, a broad and durable economic moat ensuring me stable dividend income. And in my view, when it comes to brand loyalty and financial strength, there are very few car makers playing in the same league as BMW. In the first six months of 2017, the company sold over 1 Million vehicles, Free Cash Flow comfortably covers the dividends despite a significant ramp-up in investments (amongst others for new electric models etc.).
In June, I bought 50 stocks of BMW providing me with a projected YoC of around 4 %.
Henkel and Reckit Benkisser, two strong competitors of Procter & Gamble
I’ve had an eye on Procter & Gamble for a very long time now and its stock kept eluding me. I just did not see a price level where I felt perfectly fine in pulling the trigger. Don’t get me wrong: Procter & Gamble is such a high quality business that it deserves a premium with regard to its stock price but I feel that time has not yet come to enter into a position into that great compay.
In the meantime, I decided to have a look at its European peers. I already have a nice position in Unilever and have been rewarded quite handsomeley over the last few years.
But there are two other businesses offering compelling brand portfolios and very solid growth: The German chemical and consumer goods company Henkel and its British peer Reckit Benkisser.
In June, I acquired 32 stocks of Henkel. The 130 years old company operates in three business areas:
- Adhesive Technologies (Loctite, TechnoMelt, Bonderite etc.)
- Beauty Care (Schwarzkopf, Syoss, Taft, FA etc.)
- Home Care (Persil, Purex, Pril, Perwoll, Somat, Bref etc.)
Henkel’s brand portfolio is incredibly vast and well diversified, as said, the company is active both in the consumer and industrial sector. Henkel is competing with Unilever and Procter & Gamble on one side, but also with industrial and chemical peers such as 3M, Bayer and BASF. For me, it is the perfect long-term investment showing very solid top-line and bottom-line growth over the last decades as well as very nice dividend hikes. From 2012 to 2016, revenues grew from Bn. EUR 16.5 to Bn. EUR 18.74, operating profit in that period grew nicely from Bn. EUR 2.335 to Bn. EUR 3.17 while expanding adjusted EBIT margin (excluding one-time items) from 14.1 to 16.9 %.
In July, I acquired 38 Shares of the British consumer goods company Reckit Benkisser. Reckit Benkisser operates in following three segments:
- Consumer Health (Enfamil, Scholl, Nurofen, Strepsils etc.)
- Hygiene (Lysol, Clearasil etc.)
- Home (Finish, Cillit Bang, Calgon etc.)
Reckit Benkisser is an incredibly profitable business and its stock never get really cheap. However considering the exchange rate between the Swiss Franc and British Pound being at least 15 % higher last summer and taking into account a “nice drop” of the stock price of 5 % in July 2017, I am fine with the acquisition, providing me with YoC of around 2.5 %.
What do you think about our stock acquisitions in 2017? Did you make some nice buys this year? Please, let us know below.
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.