Monthly Archives: July 2016

Two buys to start the month and the SABMiller mess

This month I once again split my cash to buy shares of two companies. I think I mentioned it a couple of times before, I still have a bunch of free trades with my broker that expire about 8 months from now so I don’t have to worry about transaction fees when making small-sized purchases.

Two new buys this month
I started my monthly purchases by buying five more shares of biotech firm Gilead, this increases my yearly dividend income by $5.83. The day after I loaded up seven more Diageo ADRs, this buy increases my yearly dividend income by £16.10. The alcoholic beverage maker is now the third largest position in my portfolio.

Brexit impact on my SABMiller shares
The value of another alcohol position in my portfolio got hit quite a bit by the Brexit vote. While the weakening pound is sending shares of companies like Diageo and GSK higher, this is not the case for SABMiller due to the pending takeover by AB InBev. Unfortunately for me, the AB InBev bid was in GBP, I think my shares were up about 10 percent before the Brexit vote but now this has declined to a gain of just 3 percent.

On the bright side, AB InBev’s partial share offer is looking increasingly attractive. Last year when AB InBev announced its final takeover bid for SABMiller, the beer giant offered £44 all-cash or a partial share offer that was valued at £39 at the time. The partial share offer was designed as a tax-friendly option for Altria and BevCo, together these two parties hold 41 percent of the SABMiller shares. By opting for the partial share offer, these two parties can avoid paying the capital gains tax that would come with the all-cash offer.

The curious thing is that the value of the partial share offer has appreciated significantly. On one hand, the value of the AB InBev shares has gone up significantly and on the other hand the value of the pound fell significantly after the Brexit vote. As a result, the partial share offer is now worth about £51.50 — a 17 percent premium versus the all-cash offer.

There are some caveats of course, the biggest one being that these shares will not be listed on any exchange for five years, meaning they can’t be sold or transferred until the lock-up period is over. Secondly, the share offer is limited to about 41 percent of the SABMiller shares, if there’s more demand it will be handled on a pro rata basis.

At the moment I’m not entirely sure if my broker will offer the opportunity to opt into the partial share offer as these shares will be unlisted. This is something I will definitely inquiry about as I don’t mind the five-year lock-up period.

Which stocks or assets did you buy this month?

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June 2016 dividend income report

Another month has passed surprisingly fast. Here in Belgium, June was another very wet month with little sunshine. Hopefully we can catch a bit of summer in the coming weeks.

Here are the dividends in received in June 2016:

  • Unilever: 17.25EUR
  • Hershey: 5.49EUR
  • Moury Construct: 36.50EUR
  • McDonalds: 4.96EUR
  • Royal Dutch Shell: 42.95EUR
  • Gilead: 2.58EUR

In total that’s 109.73EUR for the month of June. This month’s dividend income is lower than it should be as I’m still waiting on the LON:RDSB dividend payout. Most of my Royal Dutch Shell shares were bought via the Amsterdam exchange, those dividends always arrive in time but for some reason my broker almost never gets the dividend of the London-listed shares on the payout date.

What Brexit?

While the British pound saw big drops in value versus the euro and especially the US dollar, the impact on the stock market was surprising to say the least!

Stocks dropped big on the initial panic reaction when trading opened on Friday and dipped a bit further on Monday but after that my dividend portfolio raked in new all-time highs as if the Brexit vote never happened.

While some stocks, and I’m thinking about financials in particular, are still down significantly, I do not have any exposure in my portfolio to this segment of the market. Most stocks in my portfolio rebounded very quickly and unfortunately there were no big opportunities to load up on the stocks I want like Diageo and RB. Fast forward a couple of days and it looks like the aftermath of the Brexit pushed several of my stocks to a higher trading range.

I pasted a chart of Diageo below, there was a gap down Friday, June 24th but later in the session the stock moved decidedly higher in GPB terms. The stock broke out of its trading range and is close to hitting an all-time high in its home currency. Even in US dollars it’s now trading 4.56 percent higher than before the Brexit vote. Sometimes it’s surprising what can be a catalyst for a stock price appreciation.

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Mondelēz launches bid to takeover Hershey

I bought some Hershey shares earlier this year as I liked the business and the price it was  trading at. This position didn’t do much until rumors about a buyout by Nestlé started circulating around the first week of June but on Thursday the stock exploded upwards on news of a takeover bid from Mondelez. Shares reached an all-time high of $117.79 before trading halted. Hershey confirmed they received a $107 cash-and-stock offer from Mondelez but the Hershey board unanimously rejected it.

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Friday’s last trade was at $111.95 as investors are hoping for a higher bid or perhaps even a bidding war. From a long-term perspective, I would like to see the company remain as it is. As Joshua Kennon explains over here (and I continue to be amazed at how fast he can write such eloquent pieces!), a buyout by Mondelez is not in the interest of those who want to hold the stock for many decades to come. I’m not sure if it would fly past antitrust but if this great company has to be acquired by someone, I hope it will be Nestlé.

How was your month?