July 2017 Expenses and Investments

Since starting the Expense Reduction Project (ERP) project, I wanted to be publicly accountable for our expenses.  I plan to share the expenses and passive income on a go forward basis.  We haven’t been frugal by any means.  Since we earned a large income from our day jobs we were still able to save 60% of our income.  Now that we are moving to a single income, I want to lower our expenditures to maintain our savings rate.

July Expenses

Wow, July was a blur.  We took two trips for half the month of August.  One week in Isle of Palms and one week in Hilton Head Island.  Our food bill was astronomically high.  However, we were entertaining many family members and everyone ate extremely well with plenty of seafood to go around.

We also had a large bill for the vacation rental.  This was split amongst many family members.

July marks the last month for some expenditures.  We already cut the dog walker and lowered our cable bill.  There are a few more projects I am working on to cut our service based expenses.  The other major area of opportunity is our food bill.  Since I will be cooking much more, i expect our food expense to drop.

We had one minor health issue that required an overnight stay in the pediatric hospital last month.  There were a few follow up exams to pay for this month.  Nothing we can do to prepare unplanned medical expenses except for a sufficient emergency fund.

Passive Income from Dividends

I haven’t tracked our dividend income for a few years.  For the past couple years I have transitioned away from some large cap dividend payers.   Some of the consumer products and a few financial institutions valuations were stretched.  I repurposed those funds into a couple non-dividend paying companies that are now part of the value portion of our taxable portfolio.  While our turnover is minimal, once in a while the opportunity cost is too great.

Over time, I intend to increase our investments in dividend growth stocks.  My intention for trimming the dividend portfolio for the past couple years was due to being in an unfavorable tax bracket and having to write a large check to the federal government to cover our dividend income.  Since we don’t required the income right now it really doesn’t make a difference to me how the companies return capital to shareholders.

Stock repurchases are just as good in my book.  For now anyway.

 

Investments Made for July

DRIP and DSPP Accounts

Most months I dollar cost average into a few companies with little to no investment cost through transfer agents like Computershare and Wells Fargo Shareowner Online.  This has been automated for some time.  Typically the companies I choose to purchase in are large cap stocks with durable competitive advantages that typically trade at a premium.  Good examples of these are Hersey and McCormick.  Both companies, I will likely hold forever if investors are given the opportunity.  None of these companies are undervalued at the moment.

For July I made the following small DRIP investments

$200.00 Home Depot
$100.00 Realty Income
$100.00 PPL
$100.00 McCormick
$100.00 Disney
$100.00 Disney
$100.00 Abbvie
$100.00 Hershey
$200.00 Coca Cola

Other Investments Made

From time to time I make purchases in other equities with monthly contributions to our brokerage accounts, pooled dividends, proceeds from sales or other extra money from our day job.  This month I made two purchases in the retail sector.  I believe that retail was particularly beaten down due to the amazon effect.  One purchase was an add-on and the other was a brand new position for us, but one I have been waiting on the sidelines for years.

Tailored Brands

On 7/10 I purchased 250 shares at 10.19 per share of Tailored Brands.  I added to an existing position.  I had been holding and buying this company for over a year.   It had quite the run up and sell off, but I chose to hold it because the tax implication was very large if I took a short term gain.  In hindsight I wish I would have sold for a 100% gain in six months.

I will start by saying this company isn’t for everyone and has considerable risks.   The company has far too much debt that was used to pay for the Jos A Bank acquisition.  Since then, the stock has struggled due to management ending buy 1 get 3 promotions that the customer base was used to.  Same store sales crumbled.

Management has made a few blunders over the year.  I continue to hold because with a market cap of under $600M, I believe it to be undervalued by at least 50%.  If history repeats, any good news like debt refinance, improving same store sales or a new corporate apparel customer might make it jump like it did last year.  The company is heavily shorted, so it could cause a short squeeze.

This is definitely not a buy and hold forever company.  There is increased competition from the Amazon and other commerce companies in the same space.  Definitely watching this one closely.

AutoZone

On 7/5 I purchased 25 shares of Autozone at $520.49 per share.  I have been watching this company for years.  Management has aggressively repurchased shares over the years.  The share count has been reduced significantly.  However, the valuation was a lot higher for the last few years.  Today it sits with a P/E around 12.  This is low compared to its five year average of 17.95, based on Morningstar.

Three potential risks worth watching:

  • Competition from Amazon
  • Adoption of electric vehicles
  • Debt position

Mortgage Reduction

From time to time we pay down our mortgage on our primary residence.  As of today this mortgage is our only debt.  For July we paid an additional $500 to our mortgage.

Net Worth Result = +2.44%

 

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