Portfolio Thoughts (Apr. 2020)

It’s been well over a month and I’m still sheltering in place at home due to the pandemic.  No end is in sight just yet, but as the weeks go by it seems to be more normal.

I can’t say the stock market is acting normally yet (still quite a bit of volatility), but at least we seem to have finally broken the downtrend.  I’ll take it.  After 3 months of red, I’m happy to see a noticeable shade of green in my monthly Portfolio returns.

Change within my Portfolio has slowed this past month and I’ve been content to stay on the sidelines (for the most part) while corporate earnings reports and updates come to the forefront.  While the world figures out how to try to get back to normal, I’m sure the market will lead the recovery, due to its forward-looking nature.

Of course, with the passing of another month, the few transactions I made and plenty of stock price movement have affected my Portfolio standings, as well as what’s moved on and off my watchlist.  So let’s not wait any longer.  Let’s check out my latest monthly edition of Portfolio Thoughts.

 

I usually start out with a quick look at the top 10 stock positions in my Portfolio, and that won’t change this month.

Somewhat surprisingly, the stocks in my top 10 did not change compared to last month.  However, there was some jockeying for position within the group.

This month, Qualcomm (QCOM) managed to secure the #1 position by just a few dollars over RPM International (RPM).  In fact, QCOM leapt over Procter & Gamble (PG) as well.  RPM and PG slipped one spot each to #2 and #3, respectively.  I expect these 3 stocks to continue wrestling each other for the top spot next month.

Pepsico (PEP) was able to climb one spot to the #4 position.  This defensive stock has been holding up well in the current market environment, allowing it to move up the rankings.

Moving up another two spots this month was Johnson & Johnson (JNJ).  It was only a few months ago that JNJ was outside my top 10, and now it’s at #5.  In the last month alone, JNJ has gone from a 52-week low to a 52-week high.  Amazing.

My only top 10 stock to fall more than two spots this past month was Visa (V).  V now resides in the #6 position.  I wouldn’t say V has been a poor performer for me, but it didn’t snap back in April as much as the other top 10 stocks.

Dropping one spot to #7 was Union Pacific (UNP).   UNP released better-than-expected Q1 earnings this past week, but offered a dim view for Q2 amid the uncertainly caused by the coronavirus.

Coming in at #8 was T. Rowe Price Group (TROW).  This was the only company to have the same rank as last month.  However, the remaining two stocks in the top 10 are very close to surpassing TROW.

The #9 and #10 stocks switched positions with each other this past month.  BlackRock (BLK) now holds the #9 spot, with Nike (NKE) sitting at #10.

Sitting just outside the top 10 are Skyworks Solutions (SWKS) and Fastenal (FAST).  We’ll see if either can crack the top 10 next month.

From the table below, my top 10 holdings comprise 38.12% of my Portfolio value, which is about 0.38% higher than last month.  Thus, my Portfolio is now a tad more top heavy.

As for the dividend weighting of the top 10, it crept up to 29.36%, an increase of 0.53% compared to last month.  This boost was helped by dividend raises from PG and JNJ in the past month.

 

 

Transactions

My number of transactions in April was significantly lower compared to the previous months of 2020.  I had only 3 transactions this month (there were 18 last month!)

In one case, I trimmed one of my bank stocks and used the proceeds to add shares of another bank stock I owned.  In the other case, I invested a chuck of capital, lowering my cost basis in a stock position that I’m looking to grow.

All the details on these 3 transactions can be found in these two posts…

 

 

Since no stocks were eliminated from my Portfolio or entered my Portfolio as a result of the transactions, the number of stocks in it remained at 51.

 

Price Movement

Note – my price changes cover closing prices from 3/27/20 to 4/24/20.

We have some green!  After a couple of painful months with nearly all red for monthly Portfolio stock returns, I’m happy to report some positive price movement.

In April, I saw better than a 3:1 ratio of stocks with price gains compared to price declines.  Of the 51 holdings, 39 moved higher and 12 moved lower.

Of the 39 stocks that rose in price, 4 were up over 20%, with another 17 up over 10% (the usual threshold I’m monitoring).  Yet another dozen were up over 5%.  No doubt, I was happy to see some upward progress for a change.

Leading the gainers this month (3 of the top 4) were a trio of Healthcare stocks.  First was Quest Diagnostics (DGX), advancing 28.33%.  DGX should see an increase in business, as they started COVID-19 antibody testing last week.  Not too far behind was JNJ, climbing 25.74%.  That’s a nice move up for a defensive stock!  Lastly, with my 4th best gain of the month was UnitedHealth Group (UNH), rising 20.14%.

The lone non-healthcare stock to rise more than 20% for me this month was Eastman Chemical (EMN).  It came in with a gain of 23.24%.  The stock had been hit hard during the March declines, and this looks like a good snap back.

A few other stocks that managed nice gains were Exxon Mobil (XOM), which rallied 18.35%, new holding Microsoft (MSFT), which shot up by 16.60%, FAST increasing 16.08%, and yet another stock from the Healthcare sector, Abbvie (ABBV), which popped 15.03%.

Of my 12 stocks that fell in price, only two dropped more than 10%, and another 2 declined more than 5%.  A vast improvement from the last couple of months!

My worst stocks for the month came from 4 different sectors.  Leading the decliners was Realty Income (O), which sank 12.27%.  With O there’s concern about their property tenants not making their lease payments given the business shutdowns.  Next was big bank Wells Fargo & Co. (WFC), which dropped 11.10%.  Concerns with WFC include loans that could be in jeopardy due to lendee bankruptcies.

VF Corp (VFC) fell 5.57% this month, enough to make it my 3rd largest decliner.  VFC could have both supply and demand issues to deal with in their clothing businesses.  Meanwhile, Nexstar Media Group (NXST) saw more red this month, to the tune of a 5.12% loss.  However, this is nowhere near as bad as in March.

REITs appeared to take it on the chin in April, as besides O as noted above, my 3 other REITs all turned in a negative month.  I saw Omega Healthcare Investors (OHI) drop 4.39%, Iron Mountain (IRM) sag 3.45%, and W.P. Carey (WPC) pull back 2.68%.

It appears the market was able to stop the bleeding this past month.  However, the pandemic is far from over, and we’ve got plenty of corporate news that will need to be digested in the next few months as countries around the globe attempt to restart their economies.  So, stay buckled up for the ride.

 

Watch List

The market gains over the past month weren’t enough to make too many stocks leave my radar.  Plenty of stocks still appear to possess favorable prices.  Yet, I still plan to move slowly and methodically in the coming weeks/months as we get a better sense of how things will play out with regard to COVID-19 and the world economies.

I plan to remain focused on quality dividend stocks.  Stocks with strong financial positions and good/long histories of increasing dividend payments.

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

As I previously mentioned, NXST has fallen quite a lot over the past couple of months… so much that I’m tempted to add to my position should it dip under $60 again.  However, NXST may not fit my corporate strength profile, as they are managing a significant debt load after a fairly recent acquisition.

I was recently able to add some shares of General Dynamics (GD) just below the $130 level I noted in last month’s Portfolio Thoughts.  However, despite the share addition, GD will remain on my watchlist.  However, I’ll probably focus on other companies unless GD drops further, into the $115-$120 range.

A couple of stocks that have run up and away from me over the past month are UNH and MSFT.  I’d like to see both with a bigger weighting in my Portfolio.  However, after their recent advances, my interest has waned.  At this point, UNH around $240 and MSFT around $150 would have me interested, but I don’t think they get there unless the entire market takes them there, and I’m not necessarily wishing for that.

One stock that climbed in price over the past month, but still has me interested at its current price is Automatic Data Processing (ADP).   A purchase at the current price would still be lower than any purchase I’ve made in ADP thus far.  ADP’s future revenues are in question thanks to the rapid rise in unemployment numbers in recent weeks.  A price below $140 still offers a good average down opportunity for me.

Lastly, I see JPMorgan Chase & Co. (JPM) as a good average down candidate for me as well.  Something below $90 would be enticing.  The stock has been there recently, so it’s not out of the question that it gets there again.

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

Last month I mentioned Waste Management (WM) and NextEra Energy (NEE) here.  While they’ve climbed in price, too, I’m not moving my price targets up for them yet.  I’m holding steady with targets for WM around $90, and NEE below $200.

Costco (COST) is a purchase option for me as well should the price drop to the $295 area.  COST recently raised their dividend by 7.7%.  That’s impressive in this environment!

 

Thoughts?

What do you think of the strength of my watchlist companies?  Do you have current concerns about any of them?  I’ve heard some chatter about a JPM dividend cut.  Please share your thoughts!