WPC - My Portfolio October Update: 6 Buys

Summary

• This month I had 6 transactions.
• New forward dividend is approximately $1.134.
• Next month I am looking to add capital to the IGaming sector, CVS Health, and/or Brookfield Asset Management.
• I am also looking to consolidate one of my smaller positions.

October is over and it was one of the best months year to date. This might come as a surprise as tech stocks were beaten down during October after the negative outlook from tech companies such as Amazon ( AMZN ), Meta Platforms ( META ), and Alphabet (GOOG) ( GOOGL ). Even though the majority of companies included in the S&P 500 that have reported results reported an earnings surprise, big tech has a significant weight in the S&P 500 and thus it is quite surprising that the S&P was up by approximately 8% this month. In my opinion, this was merely a bear market rally as I expect the S&P 500 to fall even further due to the shaky economic environment and inflation near record highs in both the US and the EU. At the same time, I keep adding capital to my portfolio as I feel like I am unable to time the market and believe that time in the market beats timing the market. As a result, I added capital to 5 positions and started a position in one of the FAANG stocks this month.

For the people that have not read my previous articles: I am a 25-year-old investor from the Netherlands who is trying to start early so that I will have the option to retire early or at least earlier (the current retirement age is 67 in NL and is trending upwards). If you are interested in previous updates on my portfolio, you can find them here:

• My Portfolio June Update - 4 Buys And 1 Sell

• My Portfolio July Update - 9 Buys, 2 Sells

• My Portfolio August Update - 3 Buys

October Update

October was the second-best month of the year for the S&P 500 despite the current environment. Inflation in the US remained around 8%, while inflation in the EU was in the low double-digits in September (but reported in October). As I mentioned last month the difference between the two regions might be due to the fact that the Fed has been raising interest rates at a faster rate than the EU and this is due to the fact that the ECB has to take into account the economy of multiple countries. This will most likely keep pressure on the Euro and is good news for the USD. For me, this means that I will add more to my European positions as the exchange rate can have a significant impact on my future returns.

In October I added capital to 5 positions and started a position in Microsoft ( MSFT ). I have been wanting to start a position in some of the FAANG stocks but always thought that they were trading at a high valuation. That is why it took me more than a year to start this position. I like the FAANG stocks and think they are of the highest quality, but at the same time they have been trading as such and there wasn't much alpha that could be generated by investing in them. Now that they have come down significantly it was time to buy at least one of them. I chose Microsoft because that is the one that I like the most in terms of credit rating, dividend growth, and the business itself.

Transactions

Rules

Beginning of October

CTPNV - Bought 30 shares for €10.24 each:

This month I continued adding capital to my European real estate stocks. As I have been adding a lot to Vonovia (VNNVF) and Aroundtown (AANNF) over the past few months I decided that it was time to give CTP some love as well. CTP is better positioned to grow in the coming years as the company has significant exposure to Eastern Europe, which is expected to grow faster than both Western Europe and the United States. On the other hand, the company is trading at a lower discount to NAV than Vonovia and Aroundtown. I estimate that the company currently trades at a discount of approximately 45% (based on NTA and discounted cash flows), while the other two trade at discounts of more than 100%. Given the higher expected growth, and to diversify my portfolio I decided to add to CTP this month.

Broadcom ( AVGO ) - Bought 0.55 shares for $456.80 each:

Broadcom is a company that I have started allocating more capital to over the past few months. The company had long been trading above my estimated fair value and has recently come down to a more reasonable valuation. There wasn't a fundamental reason why the company's share price has come down over the past few months as Broadcom is still paying out their dividend and is growing its revenue. Furthermore, if the acquisition of VMWare ( VMW ) goes through then the company is perfectly positioned for the ongoing digitization in the world. Nevertheless, my current fair value estimation does not take into account the acquisition yet as I like to be conservative with my estimations.

Mid/End of October

Vonovia - Bought 7 shares for €20.78 each:

Another European Real Estate stock that I added capital to in October is Vonovia. The company is still trading in the €19-25 range, as it has done for a couple of months now. At this price, the company is trading at approximately 1/3rd of its estimated net asset value. At the same time, the company is still selling properties for approximately book value, which it uses to lower its debt outstanding. There could be a point in the near future when it will be harder to sell these units at book value as I have heard that some investors have to pay over 6% in interest for a mortgage which is at least 2 percentage points higher than the same time last year. Nevertheless, the current environment with high inflation, low construction, and relatively low-interest rates is beneficial to Vonovia as rents will increase, and supply in Germany is limited.

Mips ( MPZAF ) ( MPZAY ) - Bought 5 shares for 334.60 SEK each:

Mips is a company that I estimate to be relatively defensive. Mips is an ingredient brand that receives royalties from helmet companies that want to implement Mips' safety system. Mips' system has been shown to reduce brain damage that is caused by rotational motion. I would argue that if you need a new helmet you would want one that protects you as well as possible and paying an additional $10-20 to have protection against rotational motion is not something that you want to save money on. For that reason, I continue to add to my position in Mips as long as it stays below my fair value estimation of 451.37 SEK.

Microsoft ( MSFT ) - Bought 1 share for $227.89 each:

After waiting for more than a year Microsoft has finally come down to my estimated fair value, which allowed me to start a position. Microsoft is one of the strongest companies in the world with a strong credit rating ((AAA)), high growth, and high efficiency ratings such as ROE and ROA. I chose Microsoft over the other FAANG as many segments of Microsoft are inelastic (such as Microsoft Office). There are not a lot of businesses/people that would be able to go without some of the products of Microsoft, whereas some of the other FAANG stocks get the majority of their revenue from more elastic segments. I expect that I will add more capital to this position in the coming months, but will only add more as long as the company trades below my fair value estimate of $231.79.

Dividends

This month my dividends were significantly lower than the same month last year. The main reason is that I have sold a significant amount of positions compared to last year. For example, I sold Altria ( MO ) and W.P. Carey ( WPC ) which are both high-yielding stocks. I do not necessarily regret this decision as I think that I have added stocks that will grow their dividend faster in the long run and I currently do not need the dividends yet.

In October two of my companies announced a dividend increase. Visa has announced that it will raise its dividend by approximately 20%, while AbbVie announced an increase of approximately 5%. At the end of the month, my forward dividend was €1,144.61 or $1,134.01. Compared to last month this was up approximately €60 or $52.

Sector Overview

Not much has changed compared to last month. REITs (which also include other real estate stocks) continue to fall even though I added approximately half of the new capital to the sector, while IT and consumer discretionary increased. In my opinion, real estate is one of the biggest opportunities right now, especially in the European stock market. The reason will be clear to my followers: high inflation leads to higher rent, and high inflation leads to lower construction, which leads to even lower supply. Therefore I am confident that these stocks are a very good deal right now.

The increase in IT is due to the capital added to Microsoft and Broadcom, and I expect that this allocation will grow in the coming months as IT/tech is finally in my buy territory.

Current Holdings

Going Forward

In November my student association will start the competition again. As the reigning champions, we hope to prolong our title. I will start giving updates again as of next month. This might also influence my own portfolio as I will have less money available. Nevertheless, I will still add at least €600 and am looking at the following stocks/sectors (besides European real estate, but that one I have covered a lot in recent months):

IGaming stocks

In the month of October, I wrote an article about Neogames ( NGMS ), a company that is active in the IGaming sector. I am still very interested in the sector and would love to have exposure to it (I used to own Aspire Global but that one was acquired). The reason why I like this sector is that there is a lot of growth as countries are starting to legalize online gambling. If I would get exposure to this sector it would be to the software providers as, in my opinion, there is slightly less risk involved. Software providers get a fixed fee and a percentage of net gaming revenue (they also share part of the cost), but they have exposure to multiple brands, which limits the risk. However, if I do decide to get exposure to this sector I would most likely start a position in two companies as this limits my exposure to company-specific risk. My favorite companies in the sector are currently aforementioned Neogames and Bragg Gaming ( BRAG ).

Brookfield Asset Management

Brookfield Asset Management is one of my favorite companies in terms of management. The company's management has proven to be good stewards of capital and has grown the company significantly over the past 20 years. Additionally, great asset managers love volatility as it allows them to buy assets at bargain prices. I expect the company to be able to do this in the current environment as well. Furthermore, the company will soon spin off its asset management business to unlock value, a strategy that has been very fruitful in the past. I expect that after the spin off the combined businesses will be worth more and am planning to keep some shares in the new business as well. For those reasons I will continue to add to this position as long as it remains below my fair value estimate of $60.10.

CVS Health

CVS Health was one of my first positions and one that I plan to hold for at least a couple more years. I first started buying the company when it was in the $50-60 range. I wish that I added more shares at that price point because the company has been a great performer, both in share price appreciation and growth. The company is also perfectly positioned to perform well in the current environment as people will still need things like medicine, health check-ups, and insurance. The only thing that I dislike about the company is that they are linked to new acquisitions almost every day. In my opinion, it would be better if the company would continue to pay off its debt and raise the dividend again in January. Nevertheless, as the acquisitions are mostly rumors at this point I would love to add to the position as long as it remains below my fair value estimation of $108.76.

Consolidating portfolio

Besides my main portfolio, I also run a couple of smaller portfolios (such as real estate only, student association, merger-arbitrage). There is one portfolio that I haven't touched in a long time and I have decided that it is time to consolidate it with my main portfolio. In the portfolio, I have multiple stocks that I hold in this one but also some smaller positions that I will most likely sell. Nevertheless, I might keep one or multiple positions that I currently do not own yet. These include positions in stocks like Alphabet, Berkshire Hathaway (BRK.A) ( BRK.B ), and Philips ( PHG ). In case I do decide to keep these I will most likely add some additional capital so that I own at least $200 in the company.

Conclusion

October was a good month in terms of stock returns with the S&P 500 up 8%. This was in stark contrast with the economic news that came out and inflation still in the high-single/low-double digits. Therefore, this is probably a bear market rally and I wouldn't give it too much weight.

In October I received approximately $57 in dividends, which was down approximately $30 compared to last year. My forward dividend at the end of October was $1.134, which is up over $52 compared to last month.

I hope you enjoyed the update about my progress, and I would love to hear your thoughts on my portfolio and what you would like to see in future updates.

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