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Portfolio Update

On Track for a Great 2017

By Roger S. Conrad, on May. 24, 2017

Each of our Lifelong Income Portfolio recommendations has reported first-quarter earnings and guidance for calendar year 2017. Our top takeaway: All are still on track to deliver to our expectations for earnings expansion, balance sheet strength and dividend growth.

That’s the essential fuel for superior total returns in our long-term investment strategy. We won’t always hold every stock for three to five years, but that’s our intent with any portfolio position.

The information we glean about our companies during earnings season provides us with an ideal checkup opportunity. Are key performance metrics still pointing in the right direction? Is management’s guidance consistent or have unexpected developments knocked the company off course?

Our decision to stick with a particular recommendation depends heavily on the answers to these questions. We’ll sell a stock when there’s a better option or when long-term upside appears limited, either by a big move higher or a special development like the $19.50 per share all-cash takeover offer for VTTI Energy Partners (NYSE: VTTI).

And deteriorating business fundamentals are always a reason to sell.

A brief glance at the Lifelong Income Portfolio shows we’ve made 18 sell ratings over the portfolio’s four-year plus lifespan.

Half of them were for the purpose of booking a profit on a name that had appreciated sharply or no longer offered a catalyst for further upside. One was a hedge we no longer needed. Four were for the purpose of swapping to a higher potential position that had come into buying range. The rest, however, were in response to indications of deterioration in the underlying business of the holding.

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