This week, four of the portfolio holdings ranked in the Top Ten: FMCB, PII, PPG, and SJW.
| Ticker | Account Value |
| FMCB | 3,123.00 |
| PII | 1,099.34 |
| PPG | 3,199.56 |
| SJW | 3,041.01 |
The lowest amount belongs to PII which last traded at $57.86. Therefore, I will acquire 5 shares of PII on Monday. Below, is the purchase history and average cost calculation.
On Monday, nearly one year will have passed since we last invested in PII. Let’s take a look at all the ways they have disappointed us over the past year.
Observations
- Clearly, the volatility in earnings is off the charts.1
- EPS for a given quarter rarely dips below the quarterly dividend, but it last did so in 2024Q1 when EPS came in at $0.23 vs the dividend of $0.66. That was the first sign this year would be a struggle.
- PII is trading like it is 2011 all over again, which makes sense because the YTD EPS puts them on the pace of CY2011 EPS.
- Dividends are soldiering on, and I expect an increase of $0.01 next quarter as PII is at the extreme high end of their payout ratio range over the past 16 years.
The reality of the situation is that PII is in a very cyclical industry and if people are complaining about the price of eggs, then buying a snowmobile is simply not a discussion. Psychologically, the hardest time to invest in a cyclical business such as this, is right now. BUT! PII has a wide moat, is very well run, and its capital management is exemplary. So, while they are feeling demand pressure across its product lines, management is incorporating defensive production measures. They have avoided discounting and price wars, possibly giving up some market share in the short term. This is all about protecting the brand name over the long term and ultimately, this is why it is in the portfolio.
Eventually, consumer demand will bottom out and reverse. We’ll grab more shares until then.
- That is an expression; I have created a chart that adequately contains said earnings. ↩︎