We’re about 1/3 of the way through 2018 and the S&P 500 is essentially flat. However, it doesn’t feel like that, does it? You mean all that movement this year and we are right where we started? Yes, we are.
The start to 2018 looked like more of the same from 2017, a steady climb higher. Yet, in late January, uncertainty returned to the market, and volatility returned with it. It took about two weeks for the S&P 500 to go from the 2018 high to the 2018 low. The closing low the index set in early February was re-tested in early April, but it seems to have found some footing for now. Currently, the S&P 500 is about 3.3% above its 2018 closing low.
Unfortunately, my Portfolio is performing a bit worse than the index, having lost about 2% for the year. After trailing the index last year, I’d like to match or exceed the performance of the index this year. If that’s going to happen in 2018, I have some ground to make up.
With it currently being earnings season, there can be a lot of price movement in reaction to earning releases, and my Portfolio stocks have seen some of that. The monthly examination of my Portfolio stocks that this post offers is my way to keep up with what’s going on within my Portfolio.
Let’s check out this month’s Portfolio Thoughts. We’ll go over my purchases & sales from this past month, see what price movement there’s been for my Portfolio holdings, and take a look at the stocks I’ve got on my watchlist.
Transactions
I have a few transactions to report from this past month.
First, I did a stock swap in April, exchanging Ensign Group (ENSG) for Nexstar Media Group (NXST). You can read more about why I did this in my Recent Transactions (Stock Swap!) post.
Second, last week I had a stock sale as a result of an assignment of a call option. The stock in question is Southern Company (SO). While I technically never had SO are part of my dividend Portfolio, I’m noting it here since the trade is being made in the same account, and the proceeds will be used for purchases of dividend stocks for the Portfolio. Check my Monthly Options Income (Apr. 2018) post for more information on this transaction.
Price Movement
I’m happy to report that for the first time in 3 months I had a nice group of stocks moving up in price. Leading the group with over 10% gains were CVS Health (CVS), Hormel Foods (HRL), and VF Corp (VFC).
CVS had a nice move up from $61 to $70. This reversed a 2-month downward trend that started in late January at the market top, and also at the time of the announcement of a merger with health insurer Aetna. Unfortunately, CVS froze their dividend as a result of the proposed merger. Should the merger take place as expected, CVS will add a good deal of debt, and the company wants to decrease the leverage that will result from the deal. This means re-directing some of the cash flow intended for shareholder returns and putting it toward debt reduction instead.
HRL moved up from $32.50 to $36.50 over the past 5 weeks, bringing it about even for 2018. The company has been dealing with rising commodity prices, possible impacts of a U.S. trade war, and issues within its Jennie-O product line, among other things. Let’s hope this recent upward trend continues.
VFC had an impressive climb higher as well, moving from about $72.50 to over $80.50. This move resumes the rise that VFC had in 2017, which was derailed this past January along with most of the market.
Some other nice gainers were T. Rowe Price Group (TROW), Visa (V), Nike (NKE) and Exxon Mobil (XOM).
As for Portfolio stocks on the decline, I had my fair share here as well. However, two really stood out… Skyworks Solutions (SWKS) and Illinois Tool Works (ITW).
SWKS tumbled from about $101 to $87, and has yet to even announce its quarterly earnings. However, it’s seen a few analyst downgrades. SWKS is a supplier of chips used in Apple’s newest iPhones, and the analysts believe iPhone sales to be revealed in Apple’s upcoming earnings announcement will be disappointing. According to estimates, Apple comprises about 35%-40% of sales for SWKS.
ITW sank from $157 to 142.50, with the majority of the drop coming this past week. This drop was despite a revenue and earnings beat in its quarterly report. 3M’s less than stellar earnings announcement this past week seemed to negatively affect the entire Industrial sector. Throw in what looks like slowing sales in the automotive arena, and there’s enough concern about near-term performance to depress ITW’s stock price for now.
A few other monthly laggards within my Portfolio include giants Procter & Gamble (PG) and Pepsico (PEP) which are caught up in the poor-performing consumer staples sector, and cell tower REIT Crown Castle International (CCI) which is responding to potentially less competition for its services as result of merger talks between Sprint and T-Mobile.
Watch List
As for my watchlist, it’s always changing, but here are the stocks I’ve currently got my eyes on.
If I decide to add to my existing Portfolio positions in the near term, a few stocks are currently looking worthy.
I haven’t added to my Pepsico (PEP) position since 2012. This was mainly due to it being one of my largest positions, but that’s changed over time. If the stock price drops below $100 I may add about 15 shares. This amount would put my position over 100 shares, allowing me to write covered calls on the shares.
I’m still looking to add to my Texas Instruments (TXN) position, as it remains the smallest in my Portfolio. I missed a chance a week or so ago to average down with 25 more shares in the high $90s, but I suspect I’ll get another opportunity.
Lastly, I’m watching Skyworks Solutions after their decline over the past two months. SWKS has an earnings release coming this week, so I’ll wait for the update that comes with that announcement before taking any action. If it turns out the sky isn’t falling (pun intended!), I may be inclined to add to my position.
With regard to non-portfolio stocks that I’m watching, there are a couple as well.
KAR Auction Services (KAR), mentioned each of the last 2 months, is still on my list. A move below $50 may get me to initiate a position.
The swoon of 3M (MMM) this past week after its earnings announcement has put that stock on my radar. It’s one of those stocks that usually trades at a premium. I think there may be more downside ahead, so I’m trying to be patient, and hope to find an entry point.
Thoughts?
How has your portfolio weathered the start to 2018? Are you seeing stock prices that are more palatable to you? What have you been watching recently? Please share your thoughts!