One Year's Enough

03/18/2014 10:30 am EST


Jim Jubak

Founder and Editor,

Given the likelihood of major supply and delivery problems that this company may face this year, MoneyShow's Jim Jubak has decided to sell his position, nearly a year since he first purchased shares.

I'm going to sell ENI S.p.A. (E) out of my Dividend Income portfolio today. The dividend portfolio is too energy-heavy for my liking at the moment, given that I think oil prices are likely to be flat to lower in 2014, and given the likelihood of major supply and delivery disruptions this year. ENI—with its exposure to supply problems in Libya, Nigeria, Mozambique, and former (so far at least) Soviet republics such as Kazakhstan, and its exposure on the demand side to the less-than-robustly growing Italian economy—currently offers an unattractive mixture of risk and reward.

When I bought ENI just about a year ago (March 25, 2013) for the portfolio, it traded at $46.04. It closed last week at $48.31, after getting some benefit from the "Ukrainian-sanctions-weren't-as-bad-as-expected" bounce. (ENI closed up 1.32% yesterday, on March 17.) I don't see the ADRs (American Depositary Receipts) moving significantly higher than yesterday's price over the next year and there's a good chance that supply disruptions, continued slow growth in Italy, and a modest decline in oil prices could take the ADRs lower.

Last year, the ADRs, which pay dividends twice a year in December and May, paid a yield of 4.9%. That's attractive—and since the Italian government still owns 30% of the company, there's little chance that the company will cut dividends—unless the stock falls in price.

Since my March 25, 2013 purchase, this position shows capital appreciation of 4.03% (as of the close on March 17) and dividends of 4.9%, for a total return of 9% in a few days less than a year.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did not own shares of ENI as of the end of December. For a full list of the stocks in the fund see the fund's portfolio here.

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