This week, four of the portfolio holdings ranked in the Top 10: MMM, NNN, QCOM and TGT.
| Ticker | Account Value |
| MMM | 2,231.92 |
| NNN | 938.34 |
| QCOM | 2,476.64 |
| TGT | 1,126.00 |
The lowest amount belongs to NNN. However, there are imbalances in the portfolio, from both a stock perspective and a sector perspective, due to the outperformance of TDS in recent weeks. Three sectors are ‘eligible’ for additional investment at this time: Consumer Discretionary, Health Care, and Materials. None of the four stocks above are from these sectors. Materials and Health Care are nowhere to be found in the entire Top Ten. However, the Top Ten does include one stock from the Consumer Discretionary sector coming in at #7. Investing $1,000 into this stock will put the portfolio back into alignment from a sector perspective and substantially improve the balance from a stock perspective.
Folks, it is time to add a new position to the Portfolio for the Ages!
Polaris Inc
Polaris starts off the Corporate Overview on their Investor Relations home page by stating that ‘For millions of people around the world, Polaris has become synonymous with adventure and passion, in both work and play.” I am not one of those people. But that in no way changes the veracity of the statement.
Here is the profile from TD Ameritrade:
Polaris Inc. is engaged in designing, engineering, and manufacturing powersports vehicles that include off-road vehicles (ORV), including all-terrain vehicles (ATV) and side-by-side vehicles; snowmobiles; motorcycles; moto-roadsters; quadricycles; boats; and related Parts, Garments and Accessories (PG&A), as well as aftermarket accessories and apparel. Its products are sold online and through dealers and distributors principally located in the United States, Canada, Western Europe, Australia, and Mexico. Its segments include Off-Road, On-Road, and Marine. The Off-Road segment primarily consists of ORVs and snowmobiles. ORVs are four-wheel vehicles designed for off-road use and traversing a wide variety of terrain, including dunes, trails, and mud. On Road segment designs and manufactures motorcycles, moto-roadsters, light duty hauling, and passenger vehicles. Marine segment designs and manufactures boats which are designed to compete in key segments of the recreational marine industry.
The Details
Data as of 2023-08-19
| Name | Polaris Inc |
| Ticker | PII |
| Website | Investor Relations |
| Sector | Consumer Discretionary |
| Dividend Streak | 28 years |
| Last Price | $104.37 |
| Div Amt (quarterly) | $0.65 |
| Ann Dividend | $2.60 |
| Last Ann Div Inc | 1.6% |
| Dividend Yield | 2.5% |
| Payout Ratio (ttm) | 23.3% |
| Beta (5-yr, mon) | 1.73 |
| P/E Ratio (ttm) | 9.34 |
| Margin of Safety | 25.5% |
Reasons to Invest
PII has a significantly higher Beta than any of the current holdings in the portfolio. A $1,000 stake in PII will raise the portfolio’s Beta from 0.85 to 0.89. That is a fairly significant impact, but the end result still promises less volatile performance than that of the S&P 500 Index. What matters more than the historical Beta is how volatile the future performance will be. I suspect the 5-year monthly Beta is significantly elevated because the pandemic-related performance has not yet aged out of the calculation. The 3-year monthly Beta (can you believe it has been that long since the market tanked under the weight of Covid?) for PII is 0.94 and probably a better indicator of what one should expect going forward. With that out of the way, there are a couple of very good reasons to consider investing in PII.
First, PII has lost a quarter of its value in 40 days, and in between earnings announcements no less. Such is what happens to Consumer Discretionary companies during broader, Fed-fueled selloffs. The important point here is that Mr. Market is offering 25% off a very good company.
Second, there is a 28-year dividend streak, yielding 2.5%, with a low payout ratio. There is plenty of room to continue growing this dividend, even if EPS is cut in half during the recession that astute analysts are predicting that I said was already underway some time ago.
There’s no point trying to time the market. Here we have an opportunity to add to the portfolio, a profitable company with a strong history of being shareholder friendly, at a significant discount to any reasonable person’s estimate of fair value – the lowest of which is from Citibank at $110. Could PII lose another 25% when the market finally bottoms out? Yup. If that happens, it will undoubtedly receive additional investment in the Royal Dividends system.
I will be purchasing 10 shares of PII on Monday morning.