I go full into Energy and high dividend stocks! November 20, 2013Posted by shaferfinancial in Finance.
Tags: AWLCF, BRKB, diversification, HCN, my portfolio, SDRL, SFL
I have now added another stock to my portfolio with funds from selling some of my HCN.
Before I go into this stock, I want to talk about my strategy.
Frederick Holverson is a Norwegion billionaire that has made his money off of oil drilling.
The companies he controls are all stockholder friendly, believing in returning profits, via dividends to its ownership. His companies are well managed and probably the best of the drillers out there. I believe that the worlds thirst for oil is not going to go down anytime soon. So this means that the non-traditional oil discoveries will have to be drilled and used. This nontraditional drilling is sand and deep sea drilling. As this is dangerous work, there is always the risk of spills and explosions that could severely hamper profits. So there is risk I am assuming. However, with the high dividend yield I am being paid well for this risk. Obviously, the larger the companies the least the risk for spills/explosions. So I have entered into this market with 3 different size companies, that engage in basically the same idea, drilling and transportation of oil.
Basically I have dramatically increased my dividends over the last few months.
The new company I took a small position in is AWLCF. It has two drilling rigs in the North Sea.
These rigs are hired out to major companies on contract for 2 and 4 years at current rates. Both rigs were recently refurbished. The company believes these rigs will last for 18 more years. It currently pays a 20%+ dividend. Note this is a risky play, but it is only a small position for me. I just received my first dividend from them of $1.10 per share!
Just so it is clear with all the changes I made here are my current positions:
Berkshire Hathaway 61% of portfolio
SFL 14% of portfolio
HCN 11% of portfolio
SDRL 10% of portfolio
AWLCF 4% of portfolio
My yield on cost of the 4 dividend producing stocks I own are 16%.
Current combined yield of my dividend producing positions is 9%.
And finally, I have a concentrated portfolio dominated by BRK. Owning 5 stocks enables you to diversify away systematic risk of .43. For comparisons sake owning 20 stocks allows you to diversify away .56 and the most you can diversify away at 400 stocks owned is .61. You should not copy my strategies unless you understand the risks you are taking. The tradeoff in diversification versus quality is one that is not given much thought by investors but is discussed by Warren Buffett. Is the extra systemic risk reduction from owning more stocks worth moving down to your 10th, 12th, 20h, or even 400th best picks? For me, it is not. Now I will probably end up with around 10 dividend producing stocks at retirement. At that point I have reduced systemic risk by .5 which is 82% of all that is possible.
Let me know what you think????