For two months now I’ve been sheltering in place at home due to the pandemic. The restrictions might be loosening up soon, but as time goes by it seems like life as we knew it will not be exactly the same. I think my employer is warming up to the idea of some employees working from home on a permanent basis. It might take some additional time to acclimate to any new normal.
As for the markets, I’m happy to see the volatility continue to ratchet down. Hopefully, we won’t have any more of those daily 1,000-point DJIA swings anytime soon.
We made it through earnings season. Many companies managed to beat their lowered expectations, however, corporate earnings guidance has been pulled in almost all cases. Who knows what will see for earnings starting in July, but I can’t imagine it will be pretty, especially after seeing those record unemployment numbers continue to climb.
My Portfolio was able to record a 2nd straight month of recovery. Another month of seeing more green than red is welcomed after a rough start to 2020.
Always a lot to cover in each Portfolio Thoughts post… I’ll start by commenting on the movement within my top 10 with respect to Portfolio value. That’s followed up by a quick review of any transactions during the month, a check of the stocks with the biggest price movement (up & down), and finally an update on my current watchlist.
Let’s get to it… here’s my latest monthly edition of Portfolio Thoughts.
Value Movement
This month brought one stock change within the top 10, and it was a strong debut, too. Last month I didn’t see any of that, just some reshuffling of the prior top 10 stocks.
However, let’s start with the top two stocks switching places within the top 10. RPM International (RPM) wrestled the top spot away from Qualcomm (QCOM). These two have been going back and forth for months, and that continued here.
Vaulting up three spots to #3 was Visa (V). The strong jump pushed Procter & Gamble (PG) and Pepsico (PEP) down a spot, to #4 and #5, respectively. Defensive names were not too strong this past month, as it seems investors rotated out of them to purchase some of the more beaten down value stocks.
That brings me to the #6 position, where Skyworks Solutions (SWKS) made an impressive top 10 debut. SWKS was sitting just outside the top 10 last month. With some nice upward price movement this month, SWKS leapfrogged no less than 5 other top 10 stocks.
At #7 is Union Pacific (UNP). UNP was my only top 10 stock to hold its position compared to last month.
That leads me to the stock that dropped the most spots in the top 10. After quickly moving up the ranks the past couple of months, Johnson & Johnson (JNJ) pulled back this time around, falling 3 spots to #8. Similar to PG & PEP, JNJ was another defensive stock giving up some ground in May.
Falling one spot each, to #9 and #10, respectively, were T. Rowe Price Group (TROW) and BlackRock (BLK).
Dropping just outside of the top 10 was Nike (NKE). It wasn’t a bad month for NKE… just not as strong as the other stocks around it in the rankings.
From the table above, my top 10 holdings comprise 37.87% of my Portfolio value, which is about 0.25% lower than last month.
As for the dividend weighting of the top 10, it jumped up to 30.33%, an increase of 0.97% compared to last month. All top 10 stocks saw an increase in their dividend weighting compared to last month. This was primarily due to one less stock (CAKE) being in the Portfolio, and the dividend suspensions of Kontoor Brands (KTB) and The Walk Disney Co. (DIS).
Transactions
My May transactions were contained to a single date. All totaled I had 5 transactions, 1 sale and 4 purchases.
The transactions were triggered by my decision to sell my Cheesecake Factory (CAKE) position. I then took the proceeds and allocated the funds to 4 of my existing holdings.
All the details on these 5 transactions can be found in this one post…
With my CAKE position being sold in its entirety, the number of stocks in my Portfolio dropped back to an even 50.
Price Movement
Note – my price changes cover closing prices from 4/24/20 to 5/22/20.
What do you know… another positive month! My Portfolio continued to recover from the depths reached in March.
In May, I recorded a 7:3 ratio of stocks with price gains compared to price declines. Of the 50 holdings, 35 moved higher and 15 moved lower.
Of the 35 stocks that rose in price, 1 was up over 30%! Another group of 4 were up over 20%, while yet another 7 moved higher by over 10% (the usual threshold I’m monitoring). Eleven more holdings were up over 5%. Counting all these stocks, that’s almost half the Portfolio moving up by over 5%.
The leading gainer this month was Nexstar Media Group (NXST), which rose a stellar 34.78%. NXST received about a 60% haircut from top to bottom at the start of the pandemic, so this appears to be a decent bounce back from what appeared to be an oversold condition. Still plenty of work to do to regain all the lost ground though.
For the 20%+ gainers, it started with Air Lease (AL), which popped 29.88%. AL saw an even more dramatic drop during the past quarter – closer to 80%! So, this appears to be the stock attempting to find some footing in the presence of all the uncertainty in the airline industry.
Other 20% gainers included Main Street Capital (MAIN), rising 24.59%, Lowe’s Companies (LOW), climbing 23.80%, and SWKS, advancing 21.25%. As it turns out, all 5 of my best gainers for May came from different sectors. So, the rally was broad-based within my Portfolio.
Finally, the lucky 7 collection of Portfolio stocks that managed to rise by 10%+ were: DIS at 16.63%, TROW at 14.70%, Eastman Chemical (EMN) at 14.30%, V at 14.07%, TCF Financial (TCF) at 10.37%, Omega Healthcare Investors (OHI) at 10.25%, and Abbvie (ABBV) at 10.18%. Again, a fairly diversified group of stocks advancing nicely.
Of my 15 stocks that fell in price, one dropped more than 20% and another declined by more than 10%. Another group of 3 did pull back by 5%+, but for the most part, the damage was contained.
My worst stock for declines was KTB, by far, as it sank 28.29%. Thankfully, KTB is the smallest position in my Portfolio (by a good amount), so this didn’t hurt too much. Still, I never like to see big drops for any of my holdings.
That was followed by a 10.22% drop from Wells Fargo & Co. (WFC). WFC continued its poor price performance since the pandemic started. I would hope the worst is priced in at this point, as the stock has dropped over 50% since late February. The dividend yield for WFC is currently 8.44%.
My other notable Portfolio decliners in May were Gilead Sciences (GILD), which dropped 7.91%, JNJ, which declined 6.77%, and PG, which sagged 5.20%. This group appears to show that the stocks which held up well during the worst of March and April were ready to give up some additional ground (and come back to the pack, if you will).
I imagine the market action will be choppy over the next quarter as countries around the globe attempt to restart their economies, some with success and others with COVID-19 flare-ups. As a result, expect plenty of ups and downs from the stocks within your collective portfolios.
Watch List
It will be slow and steady with regard to additions to my Portfolio over the coming months. There are plenty of stocks still trading at attractive prices. I’ll just need to seek out the best prospects for my Portfolio. Of course those stocks will pay dividends, but the current market environment dictates that I tilt towards quality dividend stocks – stocks with strong financial positions and a history of dividend raises.
Within my Portfolio, here are some stocks that I’m watching for possible additions…
Shares of Automatic Data Processing (ADP) are probably at the top of my watchlist right now. The current price at roughly $135 is still well below my previous additions, and I would love to see this position become a larger part of my Portfolio. The rising unemployment numbers probably provide a good headwind for ADP right now, but long-term I’d think that shouldn’t be an issue.
Despite a decent climb up in price over the past month, General Dynamics (GD) remains on my watchlist. I was able to snag some shares in the $123 range earlier this month, and the share price has risen over 10% since then, but I don’t think that will stop me from potentially adding around the current $138 level.
One position that is near the bottom of my current Portfolio holdings in terms of value, but needs to grow, is Sysco (SYY). I initiated a position in the $44 range in mid-March. Should the stock price drop into the mid-to-upper $40s again, I could see myself adding to this position and making it a bit bigger.
A couple of stocks with more uncertainty surrounding them are Caterpillar (CAT) and JPMorgan Chase & Co. (JPM). While I like the current levels around $112 and $89, respectively, the near-term business prospects have some questions that may force me to look elsewhere for the time being.
Of course, I’m still looking to add to UnitedHealth Group (UNH) and Microsoft (MSFT), but I’m trying to hold out for better prices. Based on price alone, I’m more inclined to add to UNH here, but continued growth on the part of MSFT could make today’s price inexpensive in the long-term.
As for non-Portfolio stocks that I’m watching…
It’s a short list, as I’m more inclined to look internally for additions. However, I’m not opposed to adding a new stock to my Portfolio, especially one I’ve been watching for a while, assuming the price target is reached.
My list hasn’t changed since last month. Waste Management (WM), NextEra Energy (NEE) and Costco Wholesale (COST) are the stocks here. My price targets for these stocks include WM around $90, NEE below $200 and COST around $295. NEE is the one I hope reaches my target level the most, as it’s a 2020 goal of mine to add a Utility stock to my Portfolio, and NEE seems to provide a good blend of earnings growth and dividend growth for a Utility.
Thoughts?
Has the pandemic brought about changes within your portfolio? Have weaker holdings been exposed? If so, do you have any plans for portfolio modification? Please share your thoughts!
GD has been on my buy list the last couple of months. No doubt a lot of stocks are much higher than their March lows but good values can still be found. I also focused on cash rich companies the last two months adding MSFT and AAPL to my portfolio. I agree that CAT can still look a bit shaky these days though all we need is a positive industrial/manufacturing headline and CAT will pop. I’m still doing more of the same… making monthly buys no matter what’s going on in the world… Smart? Stupid? Time will tell.
Sounds like a smart plan to me, DivHut. History has shown that the markets recover eventually. If your basic needs are covered and you’ve got some cash to invest, why not?
GD has been running up lately, so that’s good to see. The stock wasn’t participating in the recent rally as much as other stocks.
I like the MSFT and AAPL adds. It’s good to keep some growth stocks in the mix. Their stock prices seem fully valued, but if their growth continues, the current prices will be long-term bargains.