October 20, 2014

The KRIP Portfolio

The Kennon Retirement Insurance Plan, or KRIP, is a collection of tax-advantaged holdings that I began acquiring as a child. The goal was to buy blocks of high quality, blue chip stocks, park them away for 50+ years, and let compounding do the work, while I went on with my life, building my companies, starting my career, and acting as if the money didn't exist. From time to time, I discuss the KRIP investments on the site because they are relatable to people; they are companies everyone knows, held through accounts that are available to nearly everyone, and paid for by saving only $10,000 to $20,000 per year. The KRIP allows me to write about investment practices, portfolio management, and a host of other considerations such as dividend growth models, while providing real-world practical examples that make it easier to understand. These articles all discuss the KRIP portfolio. You can click the title of each individual post to read the full article. The KRIP has a sister plan, called the KGEP, that focuses on energy assets.

I Nearly Doubled the General Electric Stake in the KRIP

General Electric Schenectady

Sometimes, it can seem as if we are living in a through-the-looking-glass investment world.  With the Federal Reserve having kept us in a near-zero percent interest rate environment for so long, asset prices are ... quirky ... to say the least.  Couple this with the psychological influence of the Great Recession, where certain types of companies fell out of favor, and you have pricing differentials that make no sense.  Total stock market capitalization measured relative to GNP is too high, ind … [Read more...]

An Update to the KRIP Portfolio: Microsoft vs. McDonald’s

McDonalds Corporation Official Press 50th Anniversary Chicago Restaurant

One of the best risk management techniques I learned from reading Benjamin Graham's works early in my life was that of horizontal risk shifting.  That is, taking similarly priced assets in your portfolio and looking to find other assets with the same or better return profile (after adjusting for deferred tax benefits and switching costs) but much lower risk.  Graham applied this technique constantly in the fixed income sector, seeking to switch to bonds that were better covered by earnings and a … [Read more...]

Mail Bag: Can We Get an Update on Wells Fargo and the KRIP?

Wells Fargo and Company Dividend Stock

The question about Wells Fargo & Company and the KRIP has come up several times in my inbox so please consider this a response to all of those messages, even if I didn't happen to pick your particular message to post. Mr. Kennon, I enjoy the KRIP because it is easier for me to relate to my own family than the complicated stuff such as valuation or business ownership.  You don't talk about it much like you did and I wonder the reason.  I am curious what happened to Wells Fargo.  It was one … [Read more...]

Ultimate Factories – A Look Inside The Coca-Cola Company

Ultimate Factories Coca-Cola

Stop what you are doing, play this video, make it full screen, and turn it up to 1080p high definition.  The engineering is so beautiful it makes my heart race. I actually picked up some shares of Coke for the KRIP earlier this week as I think they are a fair deal at the moment due to some temporary factors in the business that make things look tougher than they should be long-term.  They're not a steal, by any means, but I imagine my grandkids will be very happy I did it.  In the meantime, I … [Read more...]

An Example of Real World Value Investing Through the Lens of Dr. Pepper Snapple Group

Dr Pepper

One of the biggest dangers an investor faces when he or she decides to buy individual stocks for a portfolio is the temptation to chase something "exciting", regardless of valuation.  That's a foolish undertaking.  Valuation matters a great deal.  The exact same business might be a wonderful investment at 10 times earnings but a horrible investment at 50 times earnings.  It's not enough for profits to rise, or dividends to expand; they have to offer a good return, based on what you paid, rel … [Read more...]

BHP vs BBL for Investors in the United States


With the discussion of me buying some shares of mining giant BHP Billiton the other day for the KRIP portfolio, there seems to be some confusion about the difference between BHP vs BBL, and how those are related to the BHP and BBL ADR listings on the New York Stock Exchange.  This is one of those things that is really simple, but people make it far too difficult.  Honestly, a lot of that is BHP Billiton's own fault.  If they let me write the first 10 pages of the annual report, I could make it fa … [Read more...]

I Am Starting to Make Some Strategic Asset Shifts in the KRIP

Scribbling Out Rough Comparisons

Two years ago, I broke my standard protocol and told you two things that were happening, justifying it because I was also making the purchases in the KRIP, one of the only portfolios I publicly discuss because it deals solely with very large, very popular, very old companies that almost everyone in the country owns through an index fund or retirement plan.  It was one of the few times I've ever publicly commented on a stock I was buying based on current valuation. I explained that Berkshire H … [Read more...]

Mail Bag: Have You Ever Considered LVMH for the KRIP?

Mail Bag Joshua Kennon Pen

Here is a great question about the world's preeminent luxury holding company, LVMH, which owns everything from Louis Vuitton to Dior to Givenchy to TAG Heuer, to Thomas Pink to Fendi. Hi Joshua, I not sure if you recognize me but you have replied a few times. I just wanted to know if you have ever considered LVMH for your KRIP or any other way ?? It seems to have all the pre requisites fulfilled. I have been thinking of acquiring some if it ever works out. Thanks for the blog and … [Read more...]

I’m Spending the Afternoon with the 2012 General Electric Annual Report

General Electric Annual Report Dividend

I'm sitting in my home study, reading the General Electric annual report and proxy statement that just showed up in the mail ... It's an interesting thing.  I have little doubt that 5 or 10 years from now, the General Electric dividend should be vastly higher than it is at this moment, offering an opportunity to generate a significant dividend-yield-on-cost outcome that, while appearing boring and non-eventful in the next few years, still delivered really great passive income growth further d … [Read more...]

A Dozen Years Later, I Find Myself Once Again an Owner of Goodrich After Adding United Technologies to the KRIP Portfolio

BF Goodrich

This afternoon, I shattered part of the Johnson & Johnson holdings in the KRIP portfolio and redeployed the cash I raised to a handful of other firms including United Technologies. (The transactions following the shifts resulted in an improved valuation profile, improved expected growth rate, comparable dividend yield, and split the capital among six companies instead of just one. The differential had reached a large enough chasm that I couldn't ignore it any longer.  The core Johnson & … [Read more...]