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Stocks owned do well! Will it continue? August 10, 2009

Posted by shaferfinancial in Finance.
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My two biggest ownership positions are on a decidedly upward move lately [BRKB, HCN].

Will it continue?  I have no idea.  My best guess is that they will probably pull back some.  But the bottom line is I don’t care.  The important thing is that they hold up during this recession and are positioned to grow during the next expansion.

Berkshire’s book value increased over 11% last quarter mainly due to the equity movement and derivative accounting.   The two most successful moves were the Goldman Sach’s investment and the investment in the Chinese car and battery manufacturer BYD.  Together they added over $3B to the book  value.  The float from the insurance is up over $61B, which means more to invest with.  On the down side are the various consumer companies that are suffering significant drops in revenue [20-65%] due to the economy.   The insurance divisions are doing fine with the aforementioned increase in float.  The power companies are down a small amount due to the economy and a warmer than usual spring.  Berkshire is up 70% in the last 10 years compared to the S&P 500’s 27% loss in that period.

Health Care REIT had a 6% decrease in FFO [Funds From Operations] due to some dilution from a stock offering.   Total FFO went up 17%.  They made almost $100M in acquisitions over the second quarter, a difficult period of time.  Total debt to equity has fallen to a ratio of 45%.  Future projects remain on schedule.  Dividends remain the same for the rest of the year.  Price is up over 102% in the last 10 years and dividends add another 80% to the return.

MMP is doing fine also.  They have had decreases in the amount of product going through their pipeline due to the recession.  They acquired a 900 mile pipeline this last quarter so they added about 9% to their overall pipeline.  Their storage facilities continue to perform well.  They reported an uptick in their gasoline products from last quarter, but jet fuel and diesel remains down.  Their ammonia pipeline was down for maintenance most of the quarter so it was down significantly.  They continue to produce 120% of income compared to their payout.  They plan to spend $500M in expansion capital this year.  Their price is up 45% in the last 5 years [has not been public for 10 years].  Dividends add another 40% to the return [I have only recently bought this, so the 5 year return has no bearing on my personal long term return]. Since I bought it earlier this year the price has gone up 21% plus I have received 4.8% in payouts.

I know this report has come pretty close to the last one, but I had some folks ask me for an update.  Generally, I don’t feel the need to report more than every 6 months.

I believe all three stocks are well positioned for coming out of the recession, no matter how long it takes.  I try to not predict the “when’s” having been burned before.  I feel pretty good about where I am positioned.  I learned [again] about how recessions and unexpected events create havoc to financial planning.  Nice to be positioned in a way that one can feel comfortable waiting out the recession!

Once again, I create financial plans that take all this into consideration and don’t rely on unreal expectations to suceed!  So contact me.



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