The market volatility that arrived in October has led me to make a few transactions in my Portfolio. This has mostly been re-shuffling. Over these last couple of weeks, I’ve sold one position completely, made a partial sale of another, and then added to three existing holdings.
I reduced my Portfolio weighting in sectors that I felt were overweight, and then used those proceeds to add to some stocks in sectors that I felt were underweight. In the process, I believe I have improved the growth prospects for my Portfolio as a whole.
I haven’t re-allocated all of the sale proceeds yet, so I suspect there will be a few more transactions in the coming weeks as I attempt to keep my forward dividend income from moving backwards.
Let’s go over the details for these transactions…
Based on their confectionery products, HSY is a name that most investors probably know and like. While I certainly enjoy HSY’s candy offerings, their growth and stock performance was not sweet enough for me to continue holding it.
On 10/8/18, I sold my entire HSY position, 48.791 shares at $106.25/sh. After the commission and SEC fee, the sale total was $5,181.97.
I started my HSY position back in late June 2015 when I purchased 45 shares at roughly $88/sh. The additional shares were obtained through dividend reinvestment over 3+ years.
The sale was driven by my desire to reduce my Consumer Discretionary sector weighting. Of the candidates I had in my Portfolio, I thought HSY would offer some of the slowest growth. It certainly hasn’t met my growth expectations over the time I held the stock.
HSY was in the bottom 25% of my Portfolio in terms of weighting, and I didn’t see adding to it anytime soon, especially after the stock made a nice move from the low $90s to the mid $100s over the past quarter.
The sale resulted in a long-term capital gain of $835.24, and a short-term capital gain of $3.98. The sale also resulted in a reduction of $140.91 in my annual forward dividend income.
Omega Healthcare Investors (OHI)
Dividend growth investors are most likely familiar with OHI. It’s a REIT operating in the long-term healthcare industry, mainly skilled nursing and assisted living facilities. The company has struggled over the past year or so as a couple of its largest tenants have run into difficulties making their lease payments to OHI. In addition, regulatory concerns still hang over the skilled nursing industry.
On 10/10/18, I sold about 16% of my OHI position, 20 shares at $33.33/sh. This price was a good run-up from the $25-$26 level seen about 6 months ago. After the commission and SEC fee, the sale total was $664.59.
I had a previous partial sale of OHI back in May of this year. The current sale is part of an ongoing effort of mine to reduce my exposure to this REIT, especially given its recent struggles and its currently frozen dividend. After this latest sale, OHI is now the second smallest position in my portfolio. However, thanks to its large yield, it still provides a dividend in the middle of the pack. I continue to not reinvest OHI’s dividends back into the stock, and instead use the dividends to add to other Portfolio positions.
The sale resulted in a long-term capital gain of $33.73. The gain was minimized, as I chose to sell some of my shares with the highest cost basis. A reduction of $52.80 in annual forward dividend income also occurred with the sale.
At this point, the selling stopped and the purchasing began… and it began with a name I’ve been looking to add to. I definitely like the combination of growth and yield provided by ABBV.
The ABBV addition bumps up my Healthcare sector holdings. Analysts and investors have concerns about the percentage that a single drug (Humira) contributes to ABBV’s revenue and earnings, and concerns about the eventual expiration of the drug’s patent protection. However, revenue may tail off more slowly than thought, and/or be replaced by promising drugs in its pipeline. Time will tell.
On 10/10/18, I added 14 shares of ABBV at $93.93/sh, for a total of $1,317.02 after commissions. The additional 14 shares bring my ABBV share total to 79.494 shares.
This purchase results in the addition of $53.76 in annual forward dividend income.
I see ABBV has declined further since my purchase, so adding even more shares is a strong possibility.
Skyworks Solutions (SWKS)
Frequent readers know the Information Technology sector is the one I’ve been wanting to increase my weighting in for quite a while. This has been hard to do while receiving acceptable valuations since tech has been leading the market higher most of the time. However, its been tech stocks that have been hit relatively hard during the recent market pullback (tariff concerns being a factor), which has finally put a few names on my radar, with SWKS being one of them.
SWKS is a semiconductor company, providing products for broadband, autos, cellular infrastructure, as well as the Internet of Things (IoT) space. Apple (AAPL) is a significant customer.
On 10/10/18, I added 10 shares to my SWKS holdings at $85.09/sh, for a total of $852.90 after commissions. The additional shares bring my SWKS share total to 114.527 shares.
The shares I purchased were at a yield of 1.79%. This is below my Portfolio average, but I expect SWKS to make up for the lower yield with above-average EPS growth and corresponding price appreciation.
This purchase results in the addition of $15.20 in annual forward dividend income.
Finally, I added to my BLK position. This is a follow-on to an addition I made just 2 months ago (which you can read about in my Recent Buy – BLK post from that time).
BLK has also been hit hard recently. Concerns over recent fund outflows, as well as lower fees on investment products around the industry, have taken their toll on the stock price.
On 10/16/18, I added 3 shares to my BLK position at $409.30/sh, for a total of $1,229.90 after commissions. The additional 3 shares bring my BLK share total to 23.143 shares.
The yield on the purchased BLK shares is significant at approximately 3.06%.
This purchase results in the addition of $37.56 in annual forward dividend income.
I continued to whittle down my OHI position, while eliminating HSY altogether. My Portfolio now contains 40 companies.
Despite using the above sales proceeds to purchase additional shares in three of my existing holdings (ABBV, SWKS & BLK), I still have more proceeds to deploy.
The net effect of the five total transactions with regard to my forward annual dividend income is a decrease of $87.19. Hopefully, this is just a temporary setback. I hope to use the remaining sales proceeds to purchase more shares in either existing or new dividend-paying companies, and eliminate the income reduction.
I could see adding to ABBV and BLK again if shares continue to fall. In addition, I’ve got my eyes on FedEx (FDX), among others, for possibly bringing a new stock into the Portfolio.
Any thoughts on these transactions? Have you been active given the recent market movement? Perhaps you are taking the opportunity to add to a few select positions. I look forward to your comments!