Re: Middle Age Portfolio ... Rebalance.
Over the last couple of days I was looking at positions that were oversized and overvalued and looking to trim those positions and deploy the proceeds elsewhere.
Today I trimmed overweight positions in NEE and ADP.
I added to CM in anticipation of them announcing a dividend increase for the first quarter of 2022. I then started new positions in MS, LSI and APD.
Sold --
NEE - 57 shares
ADP - 13 shares
Bought --
MS - 20 shares
LSI - 15 shares
APD - 7 shares
CM - 18 shares
Morgan Stanley (MS) is a transformed company, delivering consistent and recurring fee revenues and cash flow. With leading global franchise in investment banking, we think MS share should trade at a higher P/E multiple, closer to S&P 500 at 20.0x forward ‘22 earnings. MS was ranked number two in global equity underwriting and IPO activity in Q3 2021, and the markets remain robust. MS will benefit from equity trading volumes and transaction fees that have risen significantly with greater investor activity. Wealth and Investment Management bring stable, recurring fee revenue.
Life Storage (LSI) a BUY according to The Street. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Air Products and Chemicals (APD). According to CFRA, their Strong Buy opinion is based on their view that APD is poised to add significant projects to its base business in the next several years. They expect APD to continue to expand its industrial gases business, including new on-site projects in Asia. APD has an impressive backlog of projects that they think will continue to improve on APD’s top-tier return on invested capital. They think APD will generate strong free cash flow to help fund much of the growth internally and increase the dividend. While APD is already a leader in grey hydrogen (from hydrocarbons), with the execution of its clean hydrogen projects in Alberta and Louisiana, APD should also be a leader in blue hydrogen (hydrocarbons with carbon capture) and with its NEOM project in Saudi Arabia, APD will be a leader in Green Hydrogen (from wind and solar).
Canadian Imperial Bank (CM). We still see robust growth in domestic retail lending reflecting modest NIM pressure and market share gains in mortgage origination, expansion in U.S. commercial operations, and improved efficiencies with strong cost controls. Recovering fees could get an additional boost from faster growth in the Wealth Management unit. However, a large real estate-secured portfolio, deferred card balances, and sizeable oil & gas loans (2% of total loans) expose CM to credit-quality tail risk. That said, “red hot” housing market, solid reserve levels, and a sizeable capital buffer should provide material cushion against future loan losses. |
