Commentary for week ending 06/05/2021

I’m back!  Last weekend I was in Indianapolis for the 500.  I had a great time with some old friends at the track.   The race and the spectacle are something to behold and you should see it at least once in your lifetime.  It is an experience like no other in the US.


Now, back to the funds.  I am heartened by the performance of most of the stocks in the Growth fund.  I am particularly impressed with Fortinet, Inc. (FTNT) and I have increased my personal holdings in the stock – I believe it will reach 300 by this time next year since it concentrates on cybersecurity.   And have you noticed that Nvidia (NVDA) is on the rise again?   I recommend holding on for the ride.  I would also increase holding in Facebook (FB), as I said I believe it is undervalued – I see FB in the 400’s by next year.  Netflix (NFLX) also looks interesting at this level.  While there are competitors like Disney and Paramount, NFLX still has the highest number of unique offerings.  And many people have both NFLX and Disney – the services are not necessarily mutually exclusive.  As for the other stocks “in the red” – stay strong, as I mentioned the growth fund is for long term investors, not short term traders.


As for stocks in Income Fund, note that Merck (MRK) spun off Organon (OGN) this week.  Merck investors received 1 share of Organon for every 10 shares of Merck (so we have .4 shares of OGN in the illustrative portfolio – in reality, MRK investors only received whole shares and “cash in lieu” for the fractional shares).  OGN main businesses include women’s contraceptives and bio-similars.  It’s dividend is expected to be about 3%.  I own both MRK and OGN in my personal portfolio, so I am “eating my own cooking” when I recommend them.    The rest of the stocks are all doing well, so sit back and collect those dividends and maybe trim some of the top performers if you are need of cash, but don’t sell all.


Speaking of my personal portfolio, I am reviewing my top holdings for possible “pruning”.  I try to limit my total portfolio to be about 20 stocks and ETF’s, as any more makes the portfolio too hard to manage.  And I try to limit a stock (or ETF) to no more than 5% of the total portfolio.  One stock that has grown to be about 6.3% of my portfolio is Blackstone Group, Inc. (BX).  Blackstone Group Inc. is an investment firm that is focused on real estate, private equity, public debt and equity, growth equity, non-investment grade credit, real assets and secondary funds, all on a global basis.  I bought it in 2015 because of its extraordinary dividend (it was about 7%) back then.  The stock was in the 40’s back then, dropped to as low as 25, and it is now about 93.  The lesson here is that I held on, reinvested my dividends (adding about 36% to my total return), and now the stock has doubled (and it still pays a nice dividend, not 7% any more, but still healthy at about 3.3%).  I may trim a little off the top of this great stock, but I am still positive on its prospects.  


Another stock that I hold is Exxon Mobil (XOM).   I have held this stock for many years, and as I mentioned, I reinvested the dividends to build up my holdings, and I am now collecting the rewards of this strategy.  And as I mentioned in a prior post, oil stocks are a good hedge against inflation as the economy is improving, energy needs will increase, and supply is limited by environmental concerns.  But petroleum is still very much needed, not only for fuel, but for plastics and other materials, which are ironically needed in many so-called “green” alternatives including electric vehicles!  


As for inflation and the Democrats’ push to increase spending even as the economy grows, I still think inflation is on the horizon.  So be prepared – I recently added a bank (CFG – Citizens Financial) and a water ETF (PHO – Invesco Water Resources).  I think CFG will be a good hedge against inflation, as CFG will be able to charge more for loans and take its time in paying higher interest rates to savers (currently CFG pays a pitiful .01% percent on savings – even a million dollars doesn’t get you a better rate!).  And as I said before about PHO,  water is a scarce natural resource that may be more valuable than oil or gold.  


So, folks, that is about all for now.   Stay healthy, wealthy, and wise!  



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