In August, the stock markets seem to have wilted in the summer heat.  The wilting mostly took place the first several days of the month, and then it’s been back and forth since then trying to gain some footing.  The ongoing U.S./China trade war appears to have the most market impact these days, although the Federal Reserve’s thoughts on the direction of interest rates carries some weight as well.  In any case, the markets have pulled back from their highs.   This drops the value of my Portfolio, but does present some buying opportunities.

Some of the more defensive market sectors (Utilities, Consumer Staples, Healthcare) have been holding up well, as have REITs.  Unfortunately, these sectors don’t make up the majority of the market, so they don’t balance out the lagging sectors.

Earnings season is essentially over, so that won’t be a factor in the coming weeks.  Although, I may have a stock or two report outside of the normal earnings window, and thus make a move in either direction.

Of course, with all the market movements there’s subsequent movement within my Portfolio, too.   As I’ve mentioned before, not much value separates my largest holdings.  As a result, there always seems to be a shakeup at the top each month.

That said, RPM International (RPM) continues to hold my top spot – a Materials company no less.  I think I’ve only seen RPM in one other Portfolio.  I’m not sure why it doesn’t get much love in the investment community.  RPM has even raised its dividend for 44 straight years.  RPM is more than likely overvalued at this point, but hey, it’s hard to be mad about that.  Unfortunately, that probably means a pullback is in order, or that the stock will be flat as it works its way into its current valuation over the coming months/years.  In any case, it’s been a winner for me.

Procter & Gamble (PG) has assumed the #2 spot.  As I mentioned, Consumer Staples have been doing well this year, and PG is no exception.  Qualcomm (QCOM) has slipped from #2 to #3 this month.  It’s a volatile stock, so I expect it to move up and down my rankings very quickly.  Visa (V) slipped as well this month, from #3 to #4 in my holdings.  Rounding out my top 5 is Pepsico (PEP), another Consumer Staples stock that’s had a nice run up this year.

Still bringing up the rear with regard to value of my Portfolio holdings, and by a wide margin I might add, is Kontoor Brands (KTB), the VF Corp (VFC) spinoff.  I haven’t decided if I’ll add to the position or jettison it, but it’s too small in its current state to be of much significance in my Portfolio.  I’ll probably sit on it a while longer to see what shakes out in one or two more of the company’s quarterly reports… collecting that ~7% dividend while I wait of course.

The remainder of my bottom 5 holdings is littered with newcomers to the Portfolio.  New positions have to start somewhere, and it’s usually at the bottom.  Iron Mountain (IRM) and Zions Bancorp. (ZION) are part of this group, but I’m not looking to add to either of them at this time.  The other two are really new to my Portfolio, this week no less (see below).  I’ll be looking to build those two positions.  Curious?  Read on…

I feel like I’ve already covered quite a bit, but there always more to a Portfolio Thoughts post.  Get ready for a recap of my recent Portfolio transactions, price movement for my Portfolio stocks, and what might be on my watchlist.

 

Transactions

August turned out to be busier on the transactions front than I expected.  I had a sale occur due to an options assignment, and that motivated me to consider another sale as part of a larger Portfolio adjustment.  With the market pullback, there were several stocks that I was interested in buying, so selling the 2nd stock became that much easier.  Besides that 2nd stock was one I’d been disappointed with for the better part of a year.

In any case, the two sales led to a wad of cash in my pocket (OK, maybe it was my brokerage account).  Regardless, I didn’t waste any time in deploying the cash, adding to 3 existing positions and adding 2 new ones, essentially replacing the two stocks I sold.

All the details on the these transactions can be found in my last two posts:

Recent Sell – DHI & CAH

Recent Buy – EMN, JPM, UNH, CAT, AL

These transactions resulted in a net investment of $87.57, and they added $50.13 to my forward dividend income.

Even after all the transactions, the number of stocks in my Portfolio remained at 47.

 

Price Movement

Note – my price changes cover closing prices from 7/26 to 8/27.

After posting gains for two straight months, stock prices dropped in August.  My Portfolio saw a 2.5-to-1 ratio of stocks with price declines compared to price gains.  32 of my 45 holdings posted a loss for the month, meaning the other 13 managed to gain.

Note – I stated 45 holdings, instead of 47, since DHI and CAH are no longer being tracked due to being sold this month, and I’ll wait to track CAT and UNH beginning next month (once they have a full month of price movement).

For the most part, how my individual stocks fared this month depended on what sector it’s in.  As mentioned earlier, REITs and Consumer Staples have been recent winners, and my stocks reflect that.  I own 5 REITs and all posted gains.  As for Consumer Staples, I hold 4 of those, and 3 of the 4 rose in price, with Altria (MO) being the laggard.

My top gainer this month is Target (TGT) at 20.26%.  TGT had a blowout earnings report that exceeded all expectations.  Nearly the entire gain came on the heels of its earnings announcement.  I’m sure there is many a dividend growth investor that holds TGT and was excited to see such a large move from such an established company.

It was a long drop to my next best gainer, Crown Castle International (CCI), but I’ll take it.  The cell tower REIT climbed 11.86%.  My only other 10% mover was KTB, which mainly snapped back after being pummeled over the preceding month.  KTB rose 10.03%.  Rounding out my top five were another REIT, Omega Healthcare Investors (OHI), with a gain of 8.30%, and CVS Health (CVS) moving up by 6.57%.  It’s been a while since I’ve seen CVS show its face in my top monthly gainers, so that’s welcomed.

Two other Portfolio stocks rose at least 5% as well.  That pair consisted of Realty Income (O) and PG.

A couple of sectors not faring too well this month included Financials and Industrials, and my Portfolio reflects this, too.  I own 7 financial stocks, and 6 of the 7 declined, with Main Street Capital (MAIN) being the lone exception.  As for industrials, there are 6 of those in my Portfolio, and all managed to post price declines.

At the top of my list of decliners is one of my newcomers, Eastman Chemical (EMN).  The stock has pulled back 20.73% this past month.  This is one of the reasons I averaged down this past week.  If the decline persists, another small purchase could be coming.

My next largest decliner was also a newcomer, TCF Financial (TCF), which fell 15.57%.  I guess I should have waited a bit to purchase, huh?  Who knew?  All banks appear to be taking it on the chin these days, so I’m fairly certain I couldn’t have avoided a decline by choosing a different bank.  Next on the laggard list is Skyworks Solutions (SWKS), after dropping 15.25%.  SWKS seems to track the mood accompanying whether a U.S./China trade agreement gets done.  A couple more financials round out my 5 worst decliners for the month: Blackrock (BLK) sagged 14.15%, while ZION retreated 12.56%.

There were plenty of other stocks moving downward in my Portfolio, as 4 more were down between 10%-12%, and an additional 12 were down over 5%.  Unfortunately, there are too many to list.  That just makes them ripe for a rebound, right?

 

Watch List

Those declining stock prices always seem to result in more stocks on the watchlist.  I would say that holds true here.

Cash is still limited, but I’m always watching nonetheless.  I’m sure I could manage to scrape together a few bucks for a small purchase, so it helps to be ready.

Within my Portfolio, here are some stocks that I’m watching for possible additions…

I’m still watching Johnson & Johnson (JNJ) and waiting for a drop below $126, where it sports a ~3% yield.

I liked Exxon Mobil (XOM) at $75 last month, and now it’s at $67.  Needless to say, it’s still on my watchlist.  At this point, if I didn’t have what I consider a full position, I might be more inclined to add.  A small purchase of 10 shares is not out of the question though.

Most of the same can be said for 3M Co. (MMM).  I liked MMM last month below $165, and here it sits at $156.  The difference is MMM is a much smaller position and one that I’d like to make bigger.  Advantage MMM.

I missed by chance to add Lowe’s Companies (LOW) in the mid $90s, as it gapped up with its earnings report.  Oh well, off the watchlist for now.

BLK has dropped enough in the past few weeks that it has my attention again, too.  Dropping below $400 makes it very tempting for me.  At the current $410, it’s at the level of my last purchase.

A few of my smaller positions that I’m looking to build have dropped in price recently, so they all hit my radar.  These include this week’s newcomers UnitedHealth Group (UNH) and Caterpillar (CAT), as well as recent adds EMN and TCF (especially considering that these two led this month’s decliners for me).

I’ve been giving some thought to a sale of Cognizant Technology Solutions (CTSH), as their last earnings report did not look good, and they may not become the steady dividend payer I was hoping for when they initiated a dividend in 2017.  A delay in an expected dividend raise can make one feel that way.  I’d use the proceeds to fund the purchases I’m contemplating, as noted above.

As for non-Portfolio stocks that I’m watching…

I continue to watch Boeing (BA) and FedEx (FDX).  BA appears to be on the mend, while FDX is testing new 52-week lows.  I’d lean FDX at this point, but I’m not ready to take the plunge.

Last month, UNH was on the outside looking in, but now it’s being watched all the time thanks to being a part of the Portfolio after the aforementioned position I initiated this past week.

I can’t say I’ve got many stocks outside the Portfolio that I’m watching, as I’ve got plenty to work on within my Portfolio, especially with the handful of new companies entering my Portfolio in the past 4-5 months (6 of them, I think).

 

Thoughts?

Are you scooping up any new positions with the recent market pullback?  Or perhaps adding to positions you already have?  Maybe you’re trying to raise some cash – like me!  Please share your thoughts!