Reducing CARR; Increasing XLK

Rebalancing

As part of the continuous rebalancing of our US portfolio, today we reduced our position in Carrier Global Corporation. The position was started early on 03 April 2020 when Ratheon and United Technologies (UTX) merged into Ratheon Technologies (RTX) and at the same time spun off Carrier Global Corporation (CARR) and Otis Worldwide Corporation (OTIS). Since this spin-off we added more shares in CARR. Today we sold some CARR shares at USD 18.51. With unit costs at about USD 14.46 this represents a gain of about +28%. An excellent yield for a holding period of about 7 weeks.

With the proceeds we increased our position in SPDR Select Selector Fund - Technology (XLK), which we had started on 15 May 2020. The reason we added XLK to the portfolio was the observation that over the last few years growth stocks and in particular technology stocks outperformed value stocks. Dividend Aristocrats are a very solid base investment and represent value stocks.

We picked the technology sector as by and large the age of internet, cloud, Artificial Intelligence (AI), big data and [insert your favorite technology buzz word here] has barely started. Previous technical revolutions such as the industrial revolution or the Age of Steam had what Carlota Perez calls an "Installation Phase" followed by the turning point. We agree with Perez in that we have most likely have reached that turning point for the Age of Information and Telecommunications. We believe that for the next few decades technology companies should be well positioned to benefit from what we think is a long-term trend. Companies such as Amazon, Google or Microsoft are just the beginning. There are many more to follow.

To spread out the risk and only gradually add technology stocks we decided to utilize an Exchange Trade Fund (ETF) to start this position. At some point we may decide to add more direct investments in technology companies to our portfolio. As of writing we already have positions in Apple (AAPL), Microsoft (MSFT), Atlassian (TEAM), Nvidia (NVDA), Texas Instruments (TXN) and similar more.

Do not assume, though, that we are moving away from dividend aristocrats. Instead we believe that those still represent a very sold core investment. Therefore we continue to own shares in all 66 dividend aristocrats. We simply are "spicing up" the portfolio with some investments in the technology sector where we believe we have a sufficient understanding of the long-term opportunities of the company in terms of benefitting from the Age of Information and Telecommunications.

By mixing in some technology stocks to the dividend aristocrats we expect the performance of our overall portfolio to be between dividend aristocrats alone and the S&P 500. In other words, we expect our specific portfolio structure to perform better than the dividend aristocrats alone.

References

For more information about the work of Carlota Perez in particular her book "Technological Revolutions and Financial Capital" see her web site at http://www.carlotaperez.org/

We do not receive any benefits from any of the source listed in references.

More Portfolio Changes: BF.B, GOOG

We've made further adjustments to our US portfolio. If the share in our portfolio of any position goes above a certain threshold, we tend to consider selling some of that position in order to realize gains. At the same time we free up cash that allows us to increase a different position or to start a new position.

Brown-Forman (BF.B) had a good run and we sold some of the shares. We bought them in October 2016 at USD 46 and sold them at USD 69.22, a gain of 50.5% in about 16 month which is not a bad result. BF.B is a dividend aristocrat and we believe that they continue to be a good story. Liquor may have ups and downs but long term human mankind always gave in to the craving as history teaches us. They increased the dividend again in fourth quarter of calendar year 2017. On 23 Feb they declared a special dividend of USD 1.00 per share and also a 5 for 4 stock split. The dividend of USD 0.158 declared on the same day is already adjusted for the stock split, so is equal to the USD 0.1975 amount pre-split. BF.B has been paying dividends for 77 years and has increased the dividend in each of the lasts 33 years.

After realizing gains with selling some of our shares in Microsoft (MSFT) and AbbVie (ABBV) and after also selling our entire HCP Inc (HCP) position we used the proceed and some cash to start a new position with Alphabet Inc Class C (GOOG) at a price of USD 1,115.77. Alphabet with Google being it's biggest subsidiary and cash producer has a healthy growth rate of over 20% year-to-year. They are particularly strong in the artificial intelligence (AI) space and are also making very good progress in cloud computing. Obviously the other big guys in these markets are no push-overs. However, with the amount of cash Google produces and with the vast amount of the data they already have and continue to collect they have a lot of training data to make their AI technologies smarter as this additional data comes in. We believe GOOG is a great opportunity to participate in the commercial success of these exciting technologies.

Happy investing!

Disclosure: We hold shares in BF.B, MSFT, GOOG and ABBV. We do not hold a position for HCP. We have no plans to change any of these positions or create new positions in the first 48 hours of publishing this post.

Mobileye, Intel and BMW

Mobileye have announced that they will stop the collaboration with Tesla (TSLA) from October 2016 and focus instead on their collaboration with BMW and Intel (INTC) to develop a fully autonomous car by 2016.

This is a set-back for Tesla. Mobileye's technology is a key element for Tesla's autopilot system. We can only speculate if the recent fatal accident of a Tesla Model S, when a crossing vehicle wasn't detected by the autopilot, contributed to Mobileye's decision. Mobileye says that their new chip called "Eye4Q", expected for 2018, will be able to detect vehicles crossing lanes. Mobileye are also collaborating with Volkswagen and General Motors.

This news is another, albeit small, confirmation of BMW's strategy to develop new mobility concepts. With Daimler and Audi they acquired the mapping service Here. With Toyota BMW are collaborating in the area of hydrogen-powered fuel cells. With Mobileye and Intel BMW are collaborating on developing an autonomous car by 2016, most likely a new model under their i-series of cars. In combination this paints a promising picture for BMW: They continue to be willing to take risks to innovate.

We remain optimistic about BMW's future. They are a well-managed company in our view and we like their brand management across BMW, Mini and Rolls-Royce. We believe that they are in a good position to fend off companies like Tesla. This includes Apple (AAPL) and Google (GOOG) who are working on electric and/or autonomous cars as well. BMW have increased their dividend in each year since 2009. In contrast to other companies in the automotive sector, they continued paying a dividend even during the global financial crisis (GFC). Based on estimated earnings for 2016, BMW has a fairly low price tag at 7.75 for the price/earning ratio.

Disclosures

• We have owned BMW shares for over 10 years and intend to buy more once the downward trend ends that started in early 2015
• We have owned Toyota shares for over 10 years and have no plans to buy or sell in the next 48 hours
• We own Apple shares but have no plans to buy or sell in the next 48 hours
• We have no shares in any of the other companies mentioned in this post and we have no plan to buy in the next 48 hours