A new year has arrived, but having thoughts about how to improve the Portfolio still exist. The stock market continues its move higher, so good values are harder to find. However, it appears relative value may exist in the Utilities and REIT sectors. As for my portfolio, it’s done well, but as always it continues to evolve. Let’s find out what’s working, what’s not, and what stocks I might be looking to purchase.
Transactions
For the first time in nearly 2 months I made a purchase, and it happened this past week. After months of pondering an addition to my tech holdings, I finally added to it with a small purchase of Texas Instruments (TXN). You can read my thoughts about this in my Recent Buy – TXN post. Other than this, it’s been quiet on the purchase front, although I do have 4 open put options which could result in more purchase activity – more on this below.
Price Movement
Portfolio stocks on the rise this past month have been financials T. Rowe Price (TROW) & Blackrock (BLK), biotechs Gilead Sciences (GILD) & Abbvie (ABBV), and healthcare companies CVS Healthcare (CVS) & Cardinal Health (CAH). TROW rose from about $105 to $120, becoming the 2nd largest portfolio position, passing QCOM. Wow! It’s been a nice run for TROW over the past month, and past year for that matter. Another investment related company, BLK, jumped from $515 to $586. BLK also offered up a nice 15.2% dividend raise in January, too. Meanwhile, biotechs GILD and ABBV have powered higher as well. GILD has risen from $72 to $85 in the past month, while ABBV has continued its run, rocketing from $97 to $123. Also, delivering healthy gains this past month were CVS and CAH, as perhaps there’s less of a perceived threat to their businesses from Amazon. CVS progressed from $72 to $82… just a nice steady move. CAH continued its ascent, too, moving from $62 to $75. It’s been a mighty price recovery for CAH over the past two months. There were outstanding gains from other stocks in my portfolio, too, but the group noted above really got my attention. Overall, the past month was outstanding – I won’t expect to see gains like that again anytime soon.
The laggards this past month were consumer staples Procter & Gamble (PG) & Hormel Foods (HRL), and REITs Realty Income (O) & W. P. Carey (WPC). None of these were big moves down, but compared to the gains from other portfolio stocks, these appeared to disappoint. PG dropped from $92 to $88 as they continue to work through a business turnaround. The recent earnings report suggests that more time is needed. My faith in PG is starting to waver though, as its seems they’ve had ample time to work through the issues. I may start evaluating possible alternatives for PG. This is sad to consider given that I’m a long-term shareholder, but performance is key. Maybe PG can still make it happen. HRL has drifted lower, too, from ~$36 to ~$34. I’m not concerned here. As for O and WPC, the rising interest rate environment seems to be weighing on them. O descended from $57 to $54, while WPC fell from $69 to $66.
Watch List
As for adding to my existing positions, Skyworks Solutions (SWKS) is still on my radar from last month. SWKS moved higher over the past month, only to return to where it started. Just like last month, if it reached the low $90s I’d consider adding more. Although I’m happy with the size of my current REIT position, if O continued to move lower and dipped below $50, I’d most likely add some. I’m also looking to add to my HanesBrands (HBI) position if it drops below $21. I’ve got an open HBI put option (expires 2/16/18) to do just that.
The non-portfolio stock that I was watching last month was Comcast (CMCSA). It’s moved higher since last month. However, if it can pull back to the $37-$38 range then I’m quite interested in initiating a position. Another stock I’ve added to my watch list is Dominion Energy (D). This was motivated by Dominion’s offer to merge with SCANA (SCG) in a stock-for-stock deal. SCG is currently my only utility stock in the Portfolio. There’s a considerable amount of uncertainty regarding whether this deal closes, but if it does, my SCG shares will get exchanged for D (0.669 D shares for each share of SCG). I have 3 other stocks on my purchase radar all as a result of open put options I recently sold. The stocks in question are biotech Celgene (CELG), First Republic Bank (FRC), and utility Southern Co. (SO). You can read more about my thoughts on these stocks and options by checking my most recent Monthly Options Income (Jan. 2018) post.
Thoughts?
What’s going on with your portfolio? Big price movements either way? What’s on your purchase radar? Any companies disappointing you with their performance? Please share your thoughts!
Hi ED, On the positive front, I loved the big pop from ABBV this week. On the downside, I’ve owned GE for 10+ years and the bad news just keeps coming. I’m looking to sell GE, take the tax loss and redeploy the funds else where. Agree that relative value exists with REIT and utility stocks. They are lagging for a variety of reasons. I may redeploy the GE funds to stocks like VTR, HCN, D and/or SO. I might also even keep the GE proceeds out of the stock market as kind of a re-balance away from equities. Still thinking about it all. Thanks for the post. Tom
Hey, Tom. It always seems that for every stock in a portfolio that pops, there’s another one creating a drag… probably to be expected given a decent number of holdings.
I don’t GE, but I can see holding it these days being frustrating. It seems GE was in the midst of small rebound to start the year, only to come out with additional bad news that sent the stock lower again. Your candidates for re-deploying any GE funds that might come from a sale look like a good group. I certainly wish you the best of luck in whatever you decide to do. I appreciate you stopping in and commenting.
WooHoo! I got some TXN too. The price drop was something I could never miss. Not to mention TXN has beaten S&P 500 in the last 10 years.
Glad to have you as a fellow shareholder, DG. Let’s hope the price drop was temporary in nature, and TXN resumes its upward path. I believe you purchased prior to the ex-dividend date as well, so you can look forward to the February dividend.
Hi Engineering – good points raised here.
I’m also a big fan of utilities (although perhaps too big of a fan – especially in the past) and REITs, which currently form roughly 25% of our net worth.
Even just in the Vanguard REIT Index, the price has dropped a bit in the last couple of months to the point of me wanting to contribute again to my Roth IRA. But we’re focusing on taxable investments this year as well as looking for individual names, so I don’t know if we’ll take the Roth plunge yet.
Your mention of CMCSA is also interesting timing. I also just considered it, as it raised its dividend from 2017. It also pays in an “off” month – not the last month of the quarter – which is somewhat appealing.
Thanks again for the post. – Mike
Hi, Mike. I’m interested to see what you decide on as you start adding individual names. So many choices out there. I like CMCSA, but I’m holding out for a lower entry point. Given the relative values for utilities and REITs, and given your familiarity with those sectors, they wouldn’t be a bad place to start. However, maybe you’ll branch out into other sectors… consumer staples stocks don’t seem to have participated in the upward surge like other sectors, so perhaps some values exist there. Thanks for the comment, and good luck with the search.
Hi ED. Very nice summary and analysis. I own CVS and am pleased to see it doing better. Also PG is part of my portfolio – I’m holding on given my belief in management’s plan going forward.
TXN is still too rich for me, but I’m watching it. If it goes below $100, I will likely take the plunge.
This year my portfolio has been all about taking advantage of the good values you mentioned in utilities and REITs. I’ve established positions in DUK and D, and am excited about the future for those two companies. I’m looking at O, but am short on capital to invest at present.
Keep the good posts coming!
Hi, DF. Thanks! I’m hoping that PG will turn it around, but management seems resistant to any significant changes. As for TXN, a drop below $100 sounds like a good point to start averaging down for me. Glad you could stop by and comment.
I own ABBV so I benefited from the price increase, but I also own PG, HRL, O which showed price decline. Honestly, I generally don’t pay too much attention to the price of the stock as I dollar cost average my way into my portfolio. I get paid and then a portion of my check goes to buying stocks. However, I think I’m with you that if O drops to below $50, I might buy some extra shares beyond the usual DCA amount.
Quite a few stocks we have in common, DP. DCA is a great way to go, whether easing into a new position, or adding to an existing one. O is creeping lower, that $50 mark may be here soon.