It's Getting Hotter...
In a note to subscribers last week, I said I'm adding the air-conditioning manufacturer Carrier Global $CARR to the portfolio.

The stock's already fallen from nearly $60, so I'm betting that the stock is more or less done falling. But if the shares fall below $34, we'll reconsider the position - or perhaps average down. At $34, the current share purchase would equal a loss of around 1% to the value of the portfolio - i.e. keep your losses small, let your winners run.

The stock has shown exceptional strength lately, staying even despite the general downward market volatility in the first half of May.

$CARR is a pioneer in air-conditioning from its earliest years. But the firm only had its IPO in early 2020 after being spun off from its longtime corporate parent United Technologies.

If anyone wanted to buy a stock that's likely to benefit from the tragedy and trend of global climate change - this is it.

A good example is in NYC, where the local power company warned consumers that their electric bills would likely rise by 12% on a monthly basis - hotter temperatures are causing more people to install window/portable a/c units.

Likewise, in places like India (where the company manufactures under its subsidiary Carrier Midea India)...the country is undergoing a record breaking heat wave in May. The electricity grid is strained to the max because people are buying a/c units to deal with literally life-threatening extreme heat temperatures.

$CARR is no rocket ship - more like slow and steady, with consistent rising demand. You can buy a new A/C unit, but eventually it's going to need new parts, a shot of freon, etc - so this is a high cash flow sort of business.

$CARR is on track to $2.29 a share this year, $2.58 a share next year, and $2.89 in 2024. Analysts have started to raise profit estimates recently (notice the upticks in the blue and orange lines in the chart below) after the company reported strong quarterly results recently.

As the chart below shows. analysts have begun raising profit estimates for $CARR for 2022 (the blue line) and notably for 2024 (the orange line).

The current valuation - a price/earnings ratio of 17 - is about as cheap as its been since the company held its IPO in 2020.

And we all know we can't do without our air-conditioners. The parts wear out. Every decade or two, we have to upgrade the whole system to more efficient models.

Not a bad business model to have.

Jeff
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Dividend Forecast - Week of 5/16
Taxable
$HAS - $0.70 per share, $0.71 total, cash
$ABBV - $1.41 per share, $1.48 total, reinvesting
$PG - $0.91 per share, $1.87 total, cash
$CARR - $0.15 per share, $0.91 total, reinvesting
$NSC - $1.24 per share, $1.24 total, cash
Roth IRA
$CARR - $0.15 per share, $1.81 total, reinvesting
Do you have any dividends coming in this week?
Today's transactions
Opened new positions in $URA (full) and $MJ (partial). Increased $CARR to a full position.

$URA : Nuclear power will be needed to meet energy demands (75% increase in next 30 years), add that to demand for non-Russian energy sources. Nuclear power needs uranium. Uranium is non-renewable, but considered "clean" - low CO2 emissions. UK plans to triple nuclear power generation. French electoral platforms promise increases also. In 2020 mined uranium met only 74% of global needs, and likely to get worse as Russia is a top 6 producer.

Preferring an ETF to minimise operator risk, though I do hold $CCJ in my swing trades portfolio. Yield is 4.9%, up 328% from the previous 12 months. Will look to keep adding under $35 when position allocation sizes allow.
This weeks trades
Looking to initiate a full position in $URA and get in on the anticipated rise in demand for uranium. Also pays a healthy 4.95% dividend.

Adding to my current holdings in $CARR and $ROKU for full allocations also.

Setting sell orders for $USB $HBAN and $LNC, relatively poor performers in my portfolio and I am also well over my preferred percentage of Financials.
Portfolio Review
I am tagging along and sharing my portfolio for public discussion, like @strib, @growthinvesting, @investor_from_nepal, @from100kto1m and @sammeciar have done.

These holdings are split between two Merrill Edge accounts - a Taxable Brokerage for shorter term goals/possible early retirement and a Roth IRA built for dividend income in retirement.

I am 29 years old and a chemical engineer. These accounts have been built more or less over the last 6 years (minus the $CMA position). I contribute as I can, and utilize my Scorecard to indicate where to deploy new capital. As I mentioned yesterday, the ETFs are from Wealthfront accounts I rolled over into my self-directed accounts. I am not big on selling and the only positions on this list I have "trimmed" are $CMA, $VEA and $VWO.

Breakdown of where these holdings are residing:

Both Accounts:

Taxable:

Roth:

What are your thoughts?

Any questions/suggestions/advice?
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Scoreboard Pick of the Week - $CARR
This week's Pick of the Week is Carrier Global, $CARR! I usually pick the top holdings in my Scorecard to review, but there has not been much change at the top of the list recently. The reason I am highlighting $CARR this week is because it has been one of my most successful holdings, but just hit a 52-week low. I have done a quick synopsis of $CARR in a previous Weekly Buys post. I hold $CARR in both my Taxable and Roth IRA accounts.

$CARR is a major player in the HVAC space. Additionally, Carrier has Refrigerations and Fire & Safety business units as well.

Carrier re-listed on the public market in March of 2020. I began my position shortly after and have seen some nice price appreciation along the way. Below is the price history chart of $CARR since its listing:

There have been some slight dips in the past going into earnings season, and maybe that is what we are seeing now with next earnings report coming on April 28. Based on the below numbers, I am not concerned with this recent price movement and it could be a potential opportunity to add more.

Some helpful info from my new favorite tools, Track Your Dividends and Koyfin:

2020
  • Dividend per Share: $0.16
  • Payout Ratio: 7%
  • Revenues: $17.46B
  • Earnings: $1.64B

2021
  • Dividend per Share: $0.48 (+200%)
  • Payout Ratio: 25%
  • Revenues: $20.61B (+18%)
  • Earnings: $2.87B (75%)

2022
  • Dividend per Share: $0.60 (+25%)
  • Payout Ratio: 19%

In just a short period, there is already the potential for Carrier to be a strong dividend growth opportunity. It will be interesting to see if payout ratio can continue to decrease as the dividend continues to increase. Additionally, we are seeing both top and bottom line growth with Revenues and Earnings increasing. I believe that this company has room to grow - HVAC needs are not going away any time soon, and as technology advances and ventilation standards increase, I expect Carrier to be a major player.

Some history on my Taxable $CARR position:
  • Initial Purchase Date: 4/24/2020
  • Average Cost Basis: $25.42
  • Current Unit Price: $42.11
  • Price Appreciation (vs S&P): +159.14% (+102.39%)
  • EPS: $1.87
  • P/E: 22.52
  • Annual Dividend: $0.60
  • Dividend Yield: 1.42%
  • Yield on Cost: 2.36%
  • Portfolio Weighting: 1.42% (6.5% target)
  • Scoreboard Scorecard Rating - 3.5/5

So how does $CARR achieve the 3.5/5 on my Scorecard?
  • Stock Price Appreciation (+1)
  • Dividend Yield Lower than Portfolio Average (0)
  • Underweight versus holding target (+1)
  • P/E under 25 (+1)
  • Personal Conviction Score (+0.5)

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Losers 👎
Investors like to promote their great picks and show off their wins. Let's be honest, not every pick is a home run and we all have some losers.

Losers have come into the forefront of my mind recently. There are 3 things that have brought losers to mind:

  1. Recent market events have people seeing red
  2. The MLB season has started and I will be reminded every day for the next 6+ months that my Pittsburgh Pirates are the worst team in baseball
  3. I have been reading Fooled by Randomness by Nassim Nicholas Taleb

My top losers are (maybe unlucky, maybe not):

  1. $CHWY - down 55.54% since purchase
  2. $CRON - down 46.05% since purchase
  3. $COIN - down 33.61% since purchase

Oh no! These are terrible returns (losses)! What ever will we do? When do I sell? Should I double down?

First, I have detailed in previous Guardrail posts, I have developed a framework to help control the emotions around loss. I set a minimum holding period of 3 years for each new position so there is a measurable amount of time to evaluate the holding. As we know, the market is volatile and periods of bear markets can quickly turn to bull markets and vice versa (see $CMA, $XLE, $VDE, $SBUX).

Second, I have built into my Scorecard to value price appreciation over cheap/discounted stocks. This is an idea I have borrowed from David Gardner and Rule Breaker Investing - "Rule No. 1, let your winners run high. That's No. 1. I hope you know No. 2. No. 2, add up, don't double down." Therefore, I do not need to keep building and adding to losing positions. This is a way to mitigate loss by not continually adding to beaten down and "cheap" stocks.

Finally, I like to look at the big picture and all of my holdings. The three positions above only account for 1.5% of my Taxable Portfolio. To counter act these "Losers" I have multiple Multi-Baggers (maybe luck, maybe not):

  1. $AAPL - up 182.40% since purchase
  2. $VDE - up 177.46% since purchase
  3. $CARR - up 166.95% since purchase
  4. $CMA - up 157.77% since purchase

These 4 Multi-Baggers make up 21.1% of my portfolio. Even though it is easy to look at those terrible losses, zoom out and look at the bigger picture. Your winners will most likely far outweigh your losers! Just like the stock market, zoom out and you will see that the trend is up and to the right.

Volatility is the price of admission in this game, and we need to build the mindset to be able to handle these ups and downs. Understand that some events and picks (winners and losers) are random and will work themself out.

One thing that is not random and will not see multi-bag gains is the Pirates win total...

Happy Baseball, Happy Sunday and Happy Investing!
Portfolio Bracketology - $AAPL is the Champ!
Portfolio Bracketology has concluded and you have chosen $AAPL as your champ! $AAPL beat $VTI 21 - 16 in the final poll results (combined between Twitter and Commonstock poll).

Below is the final bracket:

The bracket was made up of all 55 of my active holdings - as verified here on @commonstock. Seeding was based on total return since initial acquisition date through 2/28/22. Final rankings are based on poll results - ranked in each round by initial seeding.

Here are final rankings of all 55 holdings based off the results of the bracket (Initial in Parentheses):

  1. $AAPL (3)
  2. $VTI (8)
  3. $O (21)
  4. $HD (42)
  5. $VDE (4)
  6. $BAM (11)
  7. $LOW (32)
  8. $TGT (47)
  9. $XLE (5)
  10. $ABBV (9)
  11. $SCHD (16)
  12. $KO (19)
  13. $VWO (20)
  14. $PFE (26)
  15. $SCHB (27)
  16. $PEP (31)
  17. $CMA (1)
  18. $CARR (2)
  19. $DD (6)
  20. $FUN (7)
  21. $RTX (10)
  22. $SCHF (15)
  23. $VEA (17)
  24. $MCD (24)
  25. $VNQ (28)
  26. $LEG (29)
  27. $SBUX (30)
  28. $HAS (40)
  29. $UL (43)
  30. $DIS (51)
  31. $COIN (52)
  32. $CTRE (53)
  33. $RVT (12)
  34. $VIG (13)
  35. $IEMG (14)
  36. $IEUR (18)
  37. $HASI (22)
  38. $PG (23)
  39. $CNA (25)
  40. $BUD (33)
  41. $CL (34)
  42. $HE (35)
  43. $TIPX (36)
  44. $VTEB (37)
  45. $PPL (38)
  46. $HSY (39)
  47. $CSX (41)
  48. $NSC (44)
  49. $LQD (45)
  50. $KMB (46)
  51. $BLV (48)
  52. $EMB (49)
  53. $T (50)
  54. $CRON (54)
  55. $CHWY (55)

Are there any surprises? Anything that stands out to you?

What are your overall thoughts on Portfolio Bracketology?

I had tons of fun putting this together and getting insight into people's perspective and thoughts on these companies holdings!
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That seems rad to me! I’ve never thought of putting your holdings head to head in a bracketed to-the-death tournament before! How do you determine the lineup to begin with?
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Q2 Portfolio Alignment
I do my best to stick to a routine cadence when it comes to investing. I have written about some of my methodology here, if you are interested.

Just like doing routine maintenance on your car, I do routine maintenance on my portfolio. The first weekend of each quarter I review my holdings and make updates to conviction ratings, reinvestment strategy and make any sales to trim positions. This routine alignment ensures I am on my intended path, but is also scheduled, so I don't go off the rails and make drastic changes on a whim.

Some of my rules for my portfolio alignment:

  • Sales - My rule is to trim overweight positions that I have held for 3+ years or sell positions that are <1% of my portfolio after 3+ years of holding.
  • Dividend Reinvestment - Reinvest dividends of S&P beaters in Taxable. Reinvest dividends of underweight holdings in Roth IRA.
  • Conviction Rating - Review each holding and record gut conviction (blind to previous rating)- either Low, Medium or High.

Taxable Brokerage

Sales:
None. $CMA and $VTI were candidates for me to sell, but I do not feel the need to trim these positions right now.

Dividend Reinvestment (Changes Only):

Conviction Rating (Changes Only):
  • $ABBV - Medium to High
  • $BUD - Medium to Low
  • $T - Low to Medium
  • $COIN - Medium to High
  • $DD - High to Medium
  • $MCD - High to Medium
  • $PEP - High to Medium
  • $PFE - High to Medium
  • $PG - High to Medium
  • $RTX - Medium to High
  • $RVT - Low to Medium
  • $SCHD - High to Medium
  • $UL - Medium to Low
  • $VIG - High to Medium

Roth IRA

Sales:
None. Could have trimmed $VWO and $VEA but didn't feel the need.

Dividend Reinvestment (Changes Only):

Conviction Rating (Changes Only):
  • $DD - High to Medium
  • $HSY - Medium to High
  • $KMB - High to Medium
  • $VIG - High to Medium
  • $VNQ - High to Medium

Reviewing my Conviction changes in both accounts, I am definitely leaning more conservative in most areas.

What are your thoughts? Do you do any portfolio maintenance activities? Would love to hear!

Have a great Sunday!
Commonstock is a social network that amplifies the knowledge of the best investors, verified by actual track records for signal over noise. Community members can link their existing brokerage accounts and share their real time portfolio, performance and trades (by percent only, dollar amounts never shared). Commonstock is not a brokerage, but a social layer on top of existing brokerages helping to create more engaged and informed investors.