The Dividend Machine by Bill Spretrino

1 Dec 2018

Dear Fellow Investor,

Last week, I listened to a pod cast by Bill Spretrino who writes The Dividend Machine, a newsletter which focuses on value investing in US Stocks. Bill walks his talk and personally invests in his recommendations.

For the last 10 years I have subscribed to his letter and his performance has averaged 17 % a year which includes dividends.

This year the market has been painful to him as he has given back substantial profits  in the recent correction.

One such share is Apple which is a core Dividend Machine  holding. He originally recommended Apple at USD 90 and it went to over USD 230. The correction has pulled it back to a recent low of USD 170.

He said on the podcast to his worried subscribers ignore the onslaught of Apple bad news such as slowing   Phone sales, China tariffs, Brexit, tech  share collapse  and focus on  value. Apple is now trading at a forward PE of 12.7 which is unheard of for a quality technology share

At the current price Warren Buffet and 3 fellow billionaire investors are adding more Apple to their portfolios.

On the home front, we have been holding Inari for the last 3 years bought at a split adjusted price of 0.95 sen It is currently trading at 1.60.  and some clients are worried.  Inari is a play on Apple as they supply parts for Apple phones.  Should Apple collapse Inari will collapse. My view is since Warren Buffet continues to add to his Apple position I am not worried.

A recent position I bought was Genting Malaysia. The punitive gaming tax rise of 10%  and the cancellation of the Walt Disney theme park project were shocks to the market. As 37 % of Genting Malaysia shares are held by foreigners and sentiment in world markets is weak, foreign sell algos hit the market  and have driven the book value to 0.87, a level last seen 10 years ago during the Asian financial crises.  

I believe Genting will find another partner to develop the theme park . Genting owns the land . In any case 87 % of revenue comes from the gamblers and only less than 10 % of revenue comes from hospitality and theme parks.  Most people go to Genting to enjoy the great food, the headline shows and the gambling. These parts of their business are not affected.

If they want to take their children to a theme park they can go to Sunway Lagoon and other attractions.

The big uncertainty now is the trade war.

In my opinion should there be a positive trade resolution  markets will  breathe  a sigh of relief

The chairman of the US Federal Reserve, Jay Powell heeded Trump’s threat  about raising interest rates and said he may slow down the pace of interest rate rises. The Dow went up over 1000 points on Powell’s statement.

Invest well and grow your wealth
Bill

Today’s critter is a red squirrel from the UK