Increased Position: Solvay

The markets are depressed! And oh boy, how they are depressed. Bad news from China, falling oil prices, a strong dollar… Actually, I don’t give a fuck. I just see windows of opportunities coming my way although I haven’t much spare cash available until my paycheck comes in. I had some money uninvested for like, a real opportunity. And that’s what I used to go shopping in a stock market with serious discounts.

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So I took my guts and most of all, my money and decided to buy 20 additional shares of the Belgian chemical group Solvay for a total price of €1580. This additional buy brings in another €49,64 net dividend a year.

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For this year, I already missed €20 but there is still almost €30 left, not to mention all the other years coming of course. This brings my total position in Solvay up to 72 shares, which makes up quite a big stake in my portfolio. Although I’m not really respecting an equal percentage in my portfolio, I think I’m doing a good thing. These 72 shares will give me a yearly net income of €178,70.

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Why did I even buy more shares of Solvay? There are a couple of reasons. First of all, they are in the market disgrace because of 3 main reasons, in my opinion. 1) The recent acquisition of Cytec did cost a lot of money and they had to do a capital raise. This brought the share price down and did some dilution as well. 2) They recently had some hold or sell ratings from a couple of banks (based on the lower oil price). 3) The lower oil price might have a small negative impact on their revenues. The recent market dip and bad news train has brought the shareprice down a lot.

What are the positive points on Solvay? The shares are trading under their fair value (€87).
They have been existing for more than 150 years and the Solvay family & relatives also hold a big stake in the company (30%). One of the biggest individual shareholders, Patrick Solvay (relative), has bought a big amount of shares in the first week of 2016. Shares were trading around €88 back then. In the picture downstairs you can see the 7 important sectors in which Solvay operates.

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They are trying to sell their Polyamides Division, to become a less cyclical business and this could bring in a nice € 1 Billion. This cash can be used to lower their debts of the acquisition of Cytec. The Group is going through a transformation towards a more stable and sustaining long-term value company. Actually they were already quite long-term, but now it’s gonna be less cyclical. Sounds good to me. Furthermore, they are becoming a world leader in the light materials business for the automotive and aeronautics, which is kinda a breakthrough. Lighter parts cost less fuel and it’s becoming more and more popular. They also managed to make an an all-plastic car engine, which has an amazing potential!

Management has also proved capable and intelligent. The current CEO, Clamadieu, was able to pull Rhodia out of big problems, made it successful again and then the company was bought by Solvay.

This all sounds good, but what about the dividend? In the end we’re still dividend growth investors aren’t we? Solvay can be seen as a strong European dividend aristocrat, for the numbers, look below.

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Now, what are other stocks I think are undervalued? I still have a €1,100 left to invest and the paycheck will come in soon too. More stocks, baby! But which? Well, I think the following stocks are rather undervalued and buyworthy: Cummins, Johnson&Johnson, PZ Cussons, Royal Dutch Shell and Smiths Group. 

Next month I plan on buying some additional shares of Shell, depending on the oil price (the lower the better), for a €1,100. As I think the oil prices will be vary volatile this year, I’ll be patient until time goes on a bit and see what the oil prices are doing. Plus, the annual report comes in and maybe the results are a little bloodier than hoped so this creates an opportunity. I’ll just keep this cash available for them Dutchies’. This is a rather sure buy.

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Next, I end up with another €1,500. Here comes the harder part. As I see a lot of opportunities but I’m limited in cash, I need to try picking the most undervalued shares.
I won’t be analyzing them in detail, but I’ll give some important numbers:

Cummins Inc designs, manufactures, and distributes engines, filtration, and power generation products. Current P/E 10,4. Yield: 4,54% + Share buyback program ($1B).

Johnson&Johnson: A well known, established healthcare company. This company doesn’t require much explanation. Current P/E: 16. Yield: 3,10%.

PZ Cussons: This is a rather small British consumer goods company that sells their products in emerging markets (especially Nigeria). Currently they’re having some headwind from the changing currencies. However, they have been a dividend aristocrat for 42 consecutive years. Current P/E: 15,8. Yield: 3,10%.

Smiths Group: is a British multinational diversified engineering business in technology. They have 5 divisions: Smiths Detection, Smiths Medical, John Crane, Smiths Interconnect & Flex-Tek. P/E: 14,6. Yield: 4,53%. I found a consecutive increasing dividend history since 1994.

I think all 4 are quite good choices at the moment. I think that Cummins will continue to have some small problems in the near future so I think I will still have a chance to pick it up in one or 2 months. Johnson&Johnson are very stable in price and they don’t have much volatility. So I guess, this can wait too for like 2 months.

I think the window of opportunity will close sooner on PZ Cussons and Smiths so I guess I will be buying some of them. What are your ideas or stocks on the watchlist?

And don’t forget in this volatile markets:

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Savings Rate: level 99

Hey guys

As I promised in my previous post 2016 Goals, I’m going to talk about my savings rate.

First of all, for a 20-year old it’s very nice getting paid to study. This brings me a nice paycheck every month. In comparison with my American colleagues who need to lean money and start in debt, this is a major benefit. Some are even paying off their debts long after they’ve graduated, which is obviously not a great start for an investor.

Secondly, my young age offers a few more advantages. I like to call this negative income as it saves me money:

  • First of all, I still live with my parents. 5 days on 7 I’m at my work so I don’t see the point in paying rent for a house or appartment I can’t spend time in. I still like living at home so as long as I can and want to stay here, it’s a money-saving situation. In my case renting would just be a complete waste of money. And if there’s anything we don’t want, it’s wasting the precious.

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  • Second point: as a poor, young student my parents give me food and some money during the academic year. This brings my groceries cost down to €0. Yes, I’m a lucky bastard.

So, very nice, few expenses. But now what do I pay for myself?

My biggest expense is my car. I know owning a car does cost a lot of money but in my case it’s still acceptable. I often need a car to get to my work because train is very time consumable. It would take me about 2h30 to commute between work & home and by car it only takes like 50 minutes to 1 hour. Also, I carry quite a lot of baggage and after the train I would need to take the subway and then still walk like 15min equiped with 2 heavy bags with all my food and stuff. I prefer the car. I really like driving and I think of it as fun. It feels like real freedom and if fuel wouldn’t be so expensive, maybe I would make some rides for fun.

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So how can I cut expenses on my car? First of all, it was kind of a present because of lucky family circumstances with promotions and stuff so I received the car. Second point: I share the insurance and tax bill with my dad. Because he doesn’t like someone else riding his car, we made this compromis when I received my car. The fuel I have to pay for myself in most cases. So now the yearly cost: Insurance 160 + Taxes 130 + Fuel 500-600 + Maintenance 200 (estimation). This comes down to around €90 a month for my car.
If I compare this to what other people pay, I think this is a very acceptable price for what I get.

So do I have other expenses? I like going to small restaurants where you’re served a very decent meal for less than €10. During school, I do this on average once a week. This comes down to €40 a month and sometimes I get a drink with friends, go to the cinema or buy a gift for special occasions. Let’s say this costs €30 a month.

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Last but not least, I really like going on holiday. As I mentioned in When I Break The Chains, I want to travel the world when I’m free. These holidays normally don’t cost much as I try to look for deals or other promotions. Last year there was rather a splurge in my travel budget as my holiday to New York cost around €2,000. But hey, no regrets, it was by far the best holiday I ever had. A ratio 3 holidays or citytrips a year, lets say this takes a €1000 out of my yearly income.

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My martial arts hobby costs me around €250 a year, my gym €0 (free gym in school). Health is even more important than money to me so I like to be ‘mens sana in corpore sano’.

As I have listed my income and expenses, I will now make it more clear in a table . This is a preview of my 2016 income and expenses. I am going to make monthly saving rate posts to see how I do and if I’m maintaining my savings rate.

Yearly income

Paycheck + bonus: €20,200
Tax refund: €1,100
Parent funding: €1,200
Family gifts: €2,000
Dividends (yay!): €680
Savings intrest: €200
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Total estimated income: €25,330

Yearly expenses

Car: €1,100
Restaurants: €400
Entertainment & Gifts: €360
Sports: €250
Holidays: €1,000
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Total estimated expenses: €3,110

–> Estimated Net Worth Increase: €22,220. Hey, isn’t this more then the €20,000 I wanted to invest in the stock market as one of my 2016 Goals? Exactly, it is €2,220 more. What do I do with this? €950 goes straight into my pension fund to reduce taxes and I also have a Home Invest Plan for €1080, which benefits me when I buy a house. These two other types of investments thus take €2030. I am left with another €190 which I take as a margin of safety on unexpected expenses.

This means I should be able to have an awesome savings rate of 87,7%!

This won’t be an easy goal to accomplish as I obviously forgot some things I can’t think of right now and which take the rate down.

I know I won’t be able to maintain this high savings rate for the long-term. In the mid-long term I will be looking to buy a house and extra expenses will come too. But, as long as it’s possible, I want to keep the rate damn high!

I am very conscious that I’m in a lucky position, with my parents still funding me and stuff. At least I try to do something good with the money and eventually it’s not wasted on poppin’ bottles in the club.

To end, a motivational pic which I think is very true.

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2016 Goals

Hi everyone

As 2016 has been on for like 13 days and I didn’t find the time to put some goals for myself, I’ll be doing this now.

Now, what are the objectives?

– First of all, I would like to invest a fresh €20,000 in the stock market to improve my dividend income and work my net worth towards €50,000. Knowing that my monthly paycheck brings in €1,502, this will be a huge challenge. In an upcoming post I will specify my savings rate and how I want to reach this target. But I can already tell you that – normally – my paycheck will be risen to at least €1,600 in the month october as I will be promoted then.

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–  Another major goal is to put at least €10,000 out of the €20,000 in ‘iShares Core S&P 500 UCITS ETF – Acc’ (CSPX). I have the tendency to buy too much individual stocks and I feel like I should have some more security in my portfolio by holding an index tracker. This index tracker adds the dividends to the shareprice so this way I don’t have to pay taxes on the dividends (extra 0,5% yield, yippie-ka-yay). For me this ETF is a very important one in diversifaction and easy handling. This requires very little maintenance and in the long term it will always go up. I have read a lot of books and The Intelligent Investor really persuaded me to go for the S&P 500 tracker. I’m deeply convinced there aren’t much better buys. If you would like to know why, I strongly recommend to read the book. Very good one.

–  My third goal is to clean my portfolio some more. Although this goal doesn’t really depend on myself, I consider it as a necessary one in my journey. As I already told in the ‘My Portfolio’ section, I started my investing career speculating. This means I ended up with 2 stocks that don’t fit me anymore, being Euronav and Peugeot. Another one that I plan on selling as soon as the price hits acceptable, is ASML. I want to work towards more solitude in my portfolio. If all these stocks could be sold at their initial entry price, this would give me €4,300 of cash. Certainly the latest weeks I found out how important it is to have some spare cash in case the market is depressed. Instead of only buying new stocks at a fair price, I prefer to strenghten some positions of solid stocks in my portfolio as well. I don’t like to buy into new positions when old ones are in red. I think this is the Buffett coming up in myself, “if they go down just buy more”.

– The fourth goal that has been set: receive at least €1,000 in dividends (cash and stocks). I’m currently on €650 if every dividend remains the same as in 2015. For the year 2015, I only received €78 (I started late buying dividend stocks so most payouts already happened). This would be a rise of almost 1,200%!

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– Last but not least, a personal health objective. I managed to practice quite a lot of sports in 2015 despite my busy working scheme. I would like to maintain the same physical level.

So far my goals for 2016, now what about yours?

 

 

When I break the chains…

What exactly are my financial and personal goals?

I would like to be financially independent somewhere in my early 30’s. This seems pretty early to retire, but I rather have enough ‘fuck you’ money to make my decisions out of opportunity instead of necessity. One of my dreams was to become a fighter jet pilot, but my eyes didn’t score 20/20. As an alternative, I would like to obtain a pilot license and fly my own helicopter. I once flew in a helicopter as a child and the feeling of freedom was indescribable. One day I want to fly with my wife and kids above our little country Belgium on a sunday afternoon.

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Ps: this is not Belgium, unfortunately. (Hawaii)

Another thing on the bucket list is to travel around the world. When I say travel the world, I really mean TRAVEL the world. Visit every little pittoresk village or city, see the true nature and stuff. Gathering knowledge and life experience about and in other cultures. If I wake up and think I would like to visit Germany today, I want to be able to do it.  I really have the need to see the world. Last year I went on a 10-day trip to New York City and it was the best holiday I ever had…by far. Although it was quite an expensive trip (around 2000 euro), it was definitely worth the money. So when I’m financially free, I’m planning to do a lot more of holidays, also the lesser known countries and areas. In my working space at home, I have a giant world map as “table protection”. When I’m distracted from my studies (believe me this happens a lot) I just start looking at the world map. Sometimes I used to close my eyes and just point to a random country, thinking if I only were able to go there right now…. Well one day I know I will be able to do this. That’s one of the major reasons I invest.

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Macchu Picchu, an awesome piece of history.

So now, the last important reason why I invest. It’s been 2 years since I really started to feel how important family is. That’s why I want to provide, to make sure we have a bright future and no financial worries. I want to teach my kids the importance of saving & investing, unlike me who was only told to save (investing was too risky). After all it didn’t do much harm, because the first 15 years of my life the intrest rates were at an acceptable level. Although I missed on some major opportunities, at my current age of 20 years, I hope to have at least 60 years left. I want my stocks and holdings to pass to my children so we can create a family fortune where everyone can chase his dreams without financial constraints. I simply love animals and since they sometimes lead miserable lives due to bad owners, I want to make donations to animal rescue groups as well.

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First buy this year: BASF

Hello everyone

As the year just started and markets are quite depressed, I saw once again a quite undervalued stock. I bought 25 shares BASF @ EUR64,48 a piece. This German company is the largest multinational chemical producer in the world. Roughly 20% of their revenues comes from oil & gas production which is why they have had quite a nosedive the last couple of months. They produce more than 8,000 different chemicals and have a market capitalisation of 65 billion dollar.

Each stock pays a nice EUR 2,89 dividend, so after the double taxes I am left with EUR 1,59. This still has a 2,45% div yield after taxes. The current PE for the stock is a little under 13. I plan to hold this stock for a very long time.

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As you see, sales should decrease a bit due to the low oil price. Nonetheless the EPS still stand strong and the oil isn’t taking a very big chunk in the company’s revenues so I don’t foresee big problems. The current ROE is 16% and the cashflow/sales is 11,5%.

I still have a small amount left in the war chest, but as I think the markets will be quite volatile this year and I already purchased for a big amount last weeks, I will wait to start new positions and strenghten old ones if they go down by a certain percentage.

 

My Portfolio & Net Worth

Hello everyone, in this section I will communicate about my stock holdings and net worth.

My portfolio as of 8th August 2017:

All prices are listed in Euro. As you can see, I’m still building my portfolio. I try to buy when I think a stock is undervalued, so in general I don’t buy much but I buy in (at least for me) bigger numbers.

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Whenever I have money available and see undervalued stocks, I buy. If you have tips or hints, feel free to post them! Everything is welcome 🙂