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Changes in my Portfolio March 31, 2014

Posted by shaferfinancial in Finance.
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As I mentioned before, I am slowly decreasing my Berkshire Hathaway position from where it once was [80%]. I am doing this gradually with the idea of moving it down to around 30% of my portfolio over the next few years. After Berkshire reported its annual results it went on a little run, so I took that opportunity to sell some at close to what I consider fair value. I am doing this to pump up my dividend growth side of my portfolio as Berkshire pays no dividends. I was able to get around $124.90 for the B shares I sold.

I combined this with a weakness in the energy stocks I own. I was able to add on to my shares of SeaDrill and AWILCO. SeaDrill price dropped precipitously last month despite company assurances that the dividend was safe. Personally, even if they dropped the dividend temporarily, it would not bother me. But, I believe the company when they say it is safe at this point. My original thesis on oil demand hasn’t changed as I see demand increasing and productivity of existing sources falling. This means that drilling has to increase, both on land and in the sea. Although a short term weakness might play itself out this year in drill ship rates, we haven’t seen that yet for SeaDrill’s drill ships. After my recent buys in the $34s and $35s, my yield on cost is over 10%. My basis per share is $38.30, so currently 9% underwater. So if the stock does nothing over the next year, I will be break even with the dividends added in. The stock price has been moving up over the last week or so. Weekly fluctuations aren’t a real concern to me as the pedal will meet the road when the new leases are announced and the pricing is exposed.

AWILCOs price also dropped as the entire sector fell out of favor. I took this opportunity to add on to my position at $19.65. My yield on cost is now over 21% and my basis is $20.35. Currently showing a small profit. Again, my thesis is that drilling in the North Sea will continue and that there is a moat preventing others from entering that area to drill. I expect a small drop in dividends when the two drilling units are put in dry dock for a short period of time to improve the safety mechanisms. This is planned for later this year. There still are long term leases on these two units going forward into 2016. However, I think in around 4+ years I will have my money back here as long as we get no surprises. Obviously this is a higher risk play and AWILCO still is my smallest position.

Currently:
BRKb 53%
SDRL 15%
SFL 13%
HCN 11%
AWLCF 7%

Still following Buffett’s strategy of a concentrated portfolio of well run businesses with moats and built in advantages. Combining these ideas with building a dividend growth portfolio that can sustain me in retirement. [I think Buffett also likes getting dividends too!].

Once again, this type of investing is not for everyone and has some inherent risk. A world wide depression would devastate its value. But, I believe the dividends are sustainable and most likely will increase significantly over the next 5 years. I am now receiving 20% of my dividend goal for retirement.
My risks in SDRL and AWILCO are balanced out by my large stake in Berkshire which is about as safe an investment as one can find.

Let me know your thoughts….

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